Quote from @Donyea Jenkins:
Quote from @Chad Clark:
I ended up being ahead in the long run. Maybe about 120% ROI. Appraised for $260k so that's not terrible, just not what I'm used to. I kept it as a cash flow property since it now can rent out for around 2k a month. I refi'd out 100k to play with something else.
I don't think I'll go down the permit route again and stick to cosmetics. It's a lot easier. Way too many unexpected costs. If I didn't have a huge profit margin, there's no way I would have came out ahead. I can see how the flippers make money at it, but they must be cutting it really close once you consider capitol gains and all the selling fees.
In relation to the Permits, what is the biggest downside to them. My initial plan is to pull permits along the way during the rehab. It's a total rehab basically so cosmetic wouldn't work. How would you argue against permits?
Permits are a necessary thing, I wouldn't argue against them. What I do argue against it how they are applied. For instance, there are no differences between a code for a simple thing that's just considered a standard industry practice vs a real safety concern. Like caulking around a toilet base is a code. I can't think of a single possible reason how that could be a safety problem. Now I totally understand most of the electrical ones since your average "Uncle joe or Granpa Bob" has made some seriously interesting electrical jobs burn a few houses down.
What really should happen is they should divide them up into categories of safety concern - Required code, Industry standard - recommended, but not required, and advanced-"It would be great if you went this far" type things. There's entirely too many "stupid" codes that are required, but far from any safety concern. It causes way too much extra cost just needing them.
That and I don't see a point in charging a mass amount of money just to allow people to do a job correctly. That's just punishing the good people. It cost several thousand dollars for all of them. That's seriously asinine.
There's also a bridging point where it becomes an entire renovation vs a simple set of repairs. There's no way to know where that point is.
In your case of wanting to pull them as you go, you won't be able to, at least in Michigan, you'd have to pull a demolition permit to even take down the drywall or paneling first. then you need the General Building permit and they will make you get an Electrical, HVAC, and Plumbing one from there and you might as well get them all at once. Then you have to close each one out with inspections to make sure it meets current codes. You won't be able to get the certificate of occupancy until it's all done. Remember, if you're going this route, you'll run into a few things you might not expect, like meeting the code for insulation. Not a tough one, but unexpected in my case. Insulation is pretty pricey and I ran into the problem of having old 2x4 walls that didn't allow enough room to put in the required amount. I had to add insulation to the outside of the house in the form of foam boards and put the siding back up. The worst part is they make you get an architect to check the framing to make sure it doesn't need any more "upgrading" for the frame. Ugh... That's a few thousand bucks. Handy hint, if it's an older (pre-70's) house, you'll end up doing some framing to reinforce it. 1800's houses will take a lot more. They used a totally different way called Balloon frames to build them which aren't real fire friendly.
If it's a duplex, there's no way to avoid using contractors since they consider it commercial. (You can do your own if it's your own home). I was able to do a bunch myself, but I had to have the contractors sign off on the HVAC, plumbing and electrical. It seems framing, insulation, drywall, and carpentry don't matter. That was my big whine, I was best at those three they required the contractors for and lousy at the rest. So I ended up doing the jobs I wasn't that great at because my budget got screwed up because I was counting on doing the expensive stuff like electrical myself.
There's a few other little things like a dryer vent and washer hoses were required, exhaust fans in the baths, and a couple windows were below the current code height to call the bedrooms a "bedroom". I'd suggest just dishing out the few hundred bucks and get the books and read them if you plan to do any yourself. Save your money on the HVAC one, it's seriously confusing and full of stuff you'll never need. Hire someone.
Hope that helps.
