Our 2900 sq/ft Ranch flip on 5 acres

Real Estate Deal Analysis & Advice
5yFollow

Our 2900 sq/ft Ranch flip on 5 acres

Thomas Weidner
Whitehouse, TX · Member since 2017 · 159 posts · 61 votes

We closed on our 2nd flip here recently. It is a 2900 sq/ft ranch style home on 5 acres in East Texas. The home was bought from the MLS. I noticed it after driving by it all the time and seeing a for sale sign on it for a very long time. It looked like it was dated so I went to Realtor.com and found it. It was all out dated on the inside. The home was listed for 190k. So my wife and I took a chance and had our agent put in a offer for 160k and seller paid all closing costs it was accepted. At closing we even received a check. I was figuring a 60k rehab.

Before putting in the offer I spoke with my lender whom we had done another flip with. We went over numbers and we talked about getting a appraisal. The bank would loan up to 80% of the appraised value. We talked to the person who had done our appraisal on the 1st flip to see if he would do this one since it was in a different market, which he had no problem doing. So we went ahead and ordered the appraisal and gave him a list of everything we were going to do with the property so it could be appraised as if it was already completed. My lender agreed to accept this type of appraisal. The appraisal came back at 330k and was submitted to the bank.

MISTAKE #1

When having an appraisal done the lender has to order the appraisal so there isn’t any conflict of interest. With us ordering the appraisal and submitting it to the bank that appraisal could not be used and another had to be ordered by the back by a different appraiser. By doing this another appraisal came back significantly lower than the first at 256k which only allowed us to borrow 204,800k for the purchase and remodel. Putting us short about 15k for remodel.

CREATIVE FINANCE STRATEGY

Our lender agreed to let us borrow up to 80% LTV based on the appraisal of the property as if the property had already been remodeled. Yes you may have to search a little bit out there for an appraiser that will do this but they are out there. This would allow you to purchase the property and have the funds for the rehab with no money out of pocket.

7Reply
117 views

Most Popular Reply

Pete Harper
Rental Property Investor · Streetman, TX · Member since 2018 · 528 posts · 495 votes
5y

@Thomas Weidner

Very creative to get the bank to agree to loan based on renovated value. Most banks won’t do that.

On the appraisal did you try and challenge the second low appraisal using the first appraisal? Often if you have data to back up your challenge you are able to win. Depending on the appraiser they can have difficulty appraising a house + land. I had a situation with a 1600sqrft house on 58 acres. The 1st bank appraisal was dismal. I looked at his comps and he was using a “shack” on land. I found another lender who agreed to appraise just the house on the 3 acre parcel, ignoring the other parcels with 55 acres. The appraisal came in significantly higher without the land. The difference the comps changed from “shacks” to homes. The best part was after refi I now owned the land free and clear with no lien. My lesson was to make the deal look as cookie cutter as possible to the bank.

1Reply
See this reply in the discussion

32 Replies

Jump to latestLatest
  • Nick Dunin
    Real Estate Investor · Longview, TX · Member since 2009 · 111 posts · 28 votes
    5y

    Thanks for the post Thomas!  Keep us posted on the progress.  I’m in Longview 

    0Reply
  • Pete Harper
    Rental Property Investor · Streetman, TX · Member since 2018 · 528 posts · 495 votes
    5y

    @Thomas Weidner

    Very creative to get the bank to agree to loan based on renovated value. Most banks won’t do that.

    On the appraisal did you try and challenge the second low appraisal using the first appraisal? Often if you have data to back up your challenge you are able to win. Depending on the appraiser they can have difficulty appraising a house + land. I had a situation with a 1600sqrft house on 58 acres. The 1st bank appraisal was dismal. I looked at his comps and he was using a “shack” on land. I found another lender who agreed to appraise just the house on the 3 acre parcel, ignoring the other parcels with 55 acres. The appraisal came in significantly higher without the land. The difference the comps changed from “shacks” to homes. The best part was after refi I now owned the land free and clear with no lien. My lesson was to make the deal look as cookie cutter as possible to the bank.

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Nick Dunin hey Nick this house is right outside of Troup. Nice to see someone else from East Texas. Pretty familiar with the Longview/Hallsville area. I lived in Carthage up until 6 yrs ago.

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Pete Harper no sir we did not challenge do to the timing of the deal. Our agent said we could but we choose not to. We needed to go ahead and close. That is pretty clever to cut the land out of the app rails to get something more comparable.

    0Reply
  • Patrick Bartlett
    Realtor · White Oak, TX · Member since 2012 · 62 posts · 24 votes
    5y

    @Thomas Weidner That is awesome! Congrats and good luck! How long do you think the reno will take?

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Patrick Bartlett I am hoping to say to say 4 months. It hasn’t really started out the way I have wanted though. With rain delays, work schedules changing, and selling our personnel home it may take a little longer.

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Pete Harper getting the bank to go off of renovated value I believe is a perk having a small private community bank rather than a big corporate bank. Also I have banked with them for over 20 years.

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Thomas Weidner

    Here is a breakdown of what we intend to do with this flip. We are going farmhouse style because it is very popular in our area right now.

    SCOPE OF WORK

    Add a carport with a back porch

    New roof

    New a/c

    Replace window glass and paint aluminum frames

    Paint brick

    Remove ornamental brick walls in front off house.

    Replace front exterior door

    Remove all paneling and texture walls

    Remove popcorn ceiling

    Add tub to master bath

    Open up the living,dining,and kitchen

    Paint, trim, and flooring throughout

    Replace all fixtures throughout

    Pictures will be coming soon!

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    Our Ranch Flip
    1Reply
  • Patrick Bartlett
    Realtor · White Oak, TX · Member since 2012 · 62 posts · 24 votes
    5y

    @Thomas Weidner I just thought Id stop by and see how it is going. Any update? Hope it is going smooth, you should make a killing in this market if you can keep your reno costs in check with the increase in materials. 

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    Here are some pictures of our new place!

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    There has been a lot that has been happening since the last update. We have hauled off 160 yards of debris. We did a lot of demo! Originally we were going to keep the cabinets  and install new doors but after finding they were the old particleboard we decided to scrap them and go with new. We took out the walls to the living area and dining to open everything up. We also took out a closet to in the master bath to add a free standing tub. And expanded the wall in the second master to make it bigger. We removed all the flooring and paneling which uncovered some water damage in several rooms. We removed the popcorn ceiling that had also been painted over with kiltz which made this a very time consuming job and during this found several places in the ceiling that was sagging. We called the drywall contractor that was going to do mudding and texture to look at the sagging. He suggested that we replace the drywall due to sagging ceilings and the mildew smell. So we ripped all the drywall out with the insulation and did a little mold remediation. This job was 2 more 40 yard dumpsters full. Next we poured a slab for a carport and back porch. We have done electrical and plumbing work installed new ac. The new insulation , drywall, and cabinets have been installed. The trim and paint is going on as we speak. New windows have been ordered but with the shortage of windows it will be September before they arrive. Flooring is ordered and tile is purchased with a install date set. The biggest thing that has changed is this has went from flip to permanent residence with a dead line. We sold our primary residence and had some land under contract. Well do to some issues with the land we pulled from the contract. This caused us to be possibly homeless. So we went back to the new buyers and rented back the new property owner until July the 12. So we are in a race against the clock to get this thing done enough to live in. We are cutting it close but I am hopeful. 

    1Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    thanks for the update!

    i was just going to suggest opening up that living space a bit. good on you. are you doing most of this yourself? the reno budget looked a bit sporty, especially with the new roof.

    it's amazing how much one can accomplish when the proverbial feet are up against the fire. rooting for y'all to get it done and move in!

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Victor S. You are very rite about the feet to the fire when there is a deadline. Lots getting done now. We have done the demo work and installed the beams. I do what I can but with the time crunch and work schedule we have had to call in subs. I have and will be doing the tile work. As far as budget goes it is pretty much shot do to all the changes with new cabinets, insulation, and drywall.

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    5y

    @Thomas Weidner we are wrapping this one up there has been some unexpected issues that came up with the plumbing that led to some costly repairs. We did have to move into the property about a month ago now and had 1 functional shower and 1 kitchen sink for the 7 of us. This made it a little rough because we didn’t have countertops in yet and the tile in the showers hadn’t been completed yet but we made due with some foam board. Our 3 night into the house some of the toilets wouldn’t flush and some of the drains were slow in parts of the house. We had a plumber come out and clean the lines with a snake and thought the issue was fixed. Always remember during demo to cover your drains! Then we were having some issues from one of the tubs when it was drained, water backed up into one of the showers. Again a call to the plumber and this time we ran cameras up the lines with no good news. This house was built in the late 70’s and had cast iron pipes in the slab. The gray water line had cracks in it an the only 2 ways to repair was bust the concrete and everything new we had done for 30’. Or install a epoxy liner inside the pipe. So our fix for this we chose the liner which was 18k and choose to put in a aerobic septic system. If we had ran the cameras up the lines during our due diligence time we would have found the pipe and could have negotiated that with the seller. That is something we know to do next time.

    1Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    4y

    We finally have new windows they were put in a couple of weeks ago. They had been on order since May. Here are a few pics of the finished product. 

    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    4y
    0Reply
  • Thomas Weidner
    OP
    Whitehouse, TX · Member since 2017 · 159 posts · 61 votes
    4y
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free