Yesterday I posted about the deal I’m working on and there was a lot of discussion on the $190k renovation (Original Post Forum: https://www.biggerpockets.com/...)
Sharing the renovation plan to get input on cost benefit analysis, feasibility, and advice from tackling similar projects.
If you are an investor and/or contractor who has experience with big renovation projects then I'd really prefer to hear from you.
A little background on this deal and the property:
* Loan: FHA203k - this is a renovation loan so there are requirements for the contractor that can be used.
- Most contractors don’t touch these loans because of how long it takes them to get paid plus all the certifications and insurance then need to have. In my area I know of 3 contractors that do 203k loans. One my realtor recommended was booked up and one was 2 hrs away. The one I went with was recommended by an acquaintance.
- Requires HUD Inspection ($1k out of pocket) after inspection the inspector gives you a specification of repairs estimate
- Timeframe - 6 months
* Property was built in 1794. Based on inspection: property has a new roof, clean crawlspace, not foundation issues, and updated electrical.
* The property has an outdated HVAC system in 2 -4 units, all 24 windows have to be replaced with certain windows, and other quirks you find in an old home; such, back porch needs to be fixed
* Unit 1 is 3 bedroom and 2 bathroom but the 3rd bedroom has a quirk
* Units 2 - 4 are 1 bedroom and 1 bathroom
* Units 2 - 4 have a bad layout. The rents in the property are way under market partially because the Seller didn’t need to make a lot of money from the home and because the layouts are bad.
* Vision: Convert Units 2 -4 into 2 bedrooms and 1 bath. The reason I'm converting is based on comps and property managers saying I can get $1,000 - $1,200 in rent by adding a bedroom. This will get me closer to the minimum $200 per unit that I'm looking for with the potential to bring in $200+ per unit.
Sharing the below floor plans for you to see the before and after plan:
Contractor/HUD Estimate of $190k: https://docs.google.com/docume...
Excited to hear what you think
Updated about 2 months ago
Updated Links Contractor/HUD Estimate of $190k: https://docs.google.com/document/d/1WvBBusREfO3KK5X9iCc4JVscbwDOI8VC428F2XnLuqg/edit?usp=sharing Unit 1: https://docs.google.com/document/d/1Uei_JxsyodgEfh_gqx4oyJqu8r3oZu2PODgquBfYYgw/edit?usp=sharing Unit 2: https://docs.google.com/document/d/1wHhvmAi3BcPj0dOy2Boy699dymvLDXF3cJYTh0psUUk/edit?usp=sharing Unit 3: https://docs.google.com/document/d/1zuUwm3lzZ9-CCJAK1CBQtWhXstqVIR54FvEagEHJCDc/edit?usp=sharing Unit 4: https://docs.google.com/document/d/1sBdGaSmWb2DfHqzn8tI7vCQ6xyXL9uIRFSiUtuJ8XrU/edit?usp=sharing
If you are having trouble accessing the links use these:
Updated Links Contractor/HUD Estimate of $190k: https://docs.google.com/docume...
Hello Kim, I'm also an investor in the Hampton Roads area (and based on the information you've provided I'm confident I know which property you're referring to) and it seems like you've done a ton of due diligence in regards to setting yourself up properly to cover all aspects of this home rehab. I suspect that based on that you'll have a lot of success as you continue to grow your rental portfolio.
That being said, based on the information you've provided I think you're overpaying for the rehab budget. The purchase price that you were able to negotiate is solid but I think your GC has some inflated pricing.
I'm not sure if this is due to the GC needing to be approved for the 203K loan that you are using but it still seems abnormally high. If you can I would cross compare some of the work with other GCs in the area.
@Isaiah Thompson thank you so much for taking the time to review everything! I’m reviewing the bid again to see where we are cut the fat
No worries! I'm just basing it off of the scope of work that you mentioned. If it helps the below items are what stuck out the most:
Plumbing: Your material costs seems high on this, usually plumbing labor cost is a lot higher than material cost. I would make sure you're aren't overpaying for plumbing materials.
Heating: I would inquire about possibly using some mini-splits instead to cut down material/installation costs.
Flooring: You could save a lot here by using carpet in the bedrooms/closets/hallways/etc...
Electrical: You mentioned that it's updated, so I would review to see you aren't replacing/updating more than you need to.
Hopefully this helps!