rehab costs are underestimated, and sh*t happens - Posted by Jim

Real Estate Investing
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Posted by Jim FL on February 05, 2004 at 22:51:22:

Jim,
Not sure by what you mean explain rehab costs.
The house needed a lot, mostly cosmetic admittedly, but it looked awful.
Drywall, carpet, tile, one semi-finished remodel job, done ALL wrong, needing tear out, and redone.
A rear patio overhang torn off, some cielings had to be replaced, because the previous owner tried to scrape off the texture coat, with what looked like a crow bar, damaging the drywall BAD.
Light fixtures, window pains, fixtures like toilets, faucets, pretty much stuff that made the house look all new and shiny when completed.
However, most of the way thru, the newly semi-remodeled kitchen, and some other areas, suffered water damage which meant we had to replace the new stuff just placed in.
This of course took time.
Basically, imagine getting a house all spruced up, almost done, and having water sitting in an attic for days, then dropping thru the drywall, which was of course, new and just primed and painted, as well as a light fixture in each room that fell and broke.
Sure, insurance might have covered it, but frankly, making a claim on a house we were trying to sell would not have been prudent, with rates where they are.
I’d hate to stick a new buyer with a house that costs more, thanks to my claim.

Anyway, hope that is what you were looking for.
Along side all that, holding costs, and commission to an agent, who happened to bring along the end buyer who was ready to go.
Not a bad deal by any means, just less than expected.

Thank goodness for buying right in the first place.
That is the best advice anyone can give.

Take care,
Jim FL

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rehab costs are underestimated, and sh*t happens - Posted by Jim

Posted by Jim on February 05, 2004 at 20:15:50:

I hear this a lot can you share your experiance when and what happened to you in a rehab gone bad?

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Re: rehab costs,sh*t happens - Posted by jasonrei

Posted by jasonrei on February 06, 2004 at 18:10:02:

Can’t say I’ve underestimated so much as to kill a nice deal.

Have one right now that had termite damage. I knew it did. Miscalculated the extent. Saw the termites on some interior decking (slab house). Gutted the bathroom and kitchen (because the sheetrock was kinda crappy) and SURPRISE- infestation! The buggers had gone up the studs and devastated the headers in most of the house. Left the studs,footers, and joists pretty much alone, but went to TOWN on the headers. That meant having to tear down a lot of sheetrock to fix things the right way, and replacing a bunch of lumber- not cheap. Anyway, we’d budgeted $17-20k. Got a really good deal on framing, sheetrock, and paint; good enough that it absorbed the extra termite outlay.

Typically, we estimate pretty well. If we’re under, it usually balances out with underestimating resale. No really costly surprises. Little ones that have crept up here and there include:
drains that required a pro to unclog
houses that have aluminum wiring and needing to put in special twists, outlets, and switches
wishfully thinking the existing electrical panel was big enough to handle improvements

Oh, here’s one that got us a few times before we FINALLY learned better:
trying to patch up old kitchen cabinets. We’d paint em and make a couple of repairs. Still they wouldn’t look right, so we’d tear them out and put in new. It’s much cheaper to put in new ones to start. It takes a bit of labor to prep ugly cabinets and paint them right. We still patch up and paint a lot of our cabinets, but where we used to do that 90% of the time, we’re now replacing 75% of the time.

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Re: rehab costs are underestimated - Posted by Jim FL

Posted by Jim FL on February 05, 2004 at 20:52:09:

Jim,
I would not say “Gone bad” necessarily, but there have been times where projected repairs turned out to be greater expense, or time consuming, or where our market value was a little high.
I still made profit on each one.

The last one that I think was a slight “oops” was a roof issue.
We had the roof inspected, it was two years old, and passed nicely.
However, we had a storm, and the rain POURED into a bathroom, thru a vent that leaked.
Sadly, I was out of town for a few days, so the damage went un-noticed.
This was an unsuspected repair, and cost me a few bucks.
At the same time, we kept getting lookers, who were willing to pay our price, but could not get a loan.
I wound up dropping my price a little, and selling to a well qualified fast closing buyer. (non-FHA)
I planned on making $30k, and walked with just over $19k when all was said and done.
Still better than a sharp stick in the eye, but certainly not the $30k planned.
Good thing I was not COUNTING on that $30k to repay living expenses, or some other unforseen thing.

So, “Gone bad”…not really.

I am a firm beleiver, and have been for some time now, that no matter what kind of deal you are doing, or how you buy it, as long as you purchase it low enough, there is a way to profit.

Anyway, two cents from an admitted part time semi-rehabber. (I do more deals of other types most of the time.)

Take care,
Jim FL

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I’m with you on a roof problem… - Posted by David Krulac

Posted by David Krulac on February 06, 2004 at 15:44:09:

Last summer I bought a house that had 6 year old roof, the shingles looked good, I didn’t climb up on the roof, as I never do that. While the shingles were good, the roof still leaked. I called a roofer, one used for many jobs over several years. Turns out the roof was installed by an amateur, probably the homeowner and was installed incorrectly. The drip edge was installed backwards. The valleys were installed incorrectly, as well as several other parts of the roof. Ended up replacing the entire roof, which failed not due to age but due to poor installation.

I average probably two complete new roofs every year and several repair roof jobs a year. So roof don’t really scare me. I’ll buy a house with a bad roof that will scare others away. One recent purchase the real estate agent advised the homeowner to do some other remodling/sprucing up to sell the house veen though the roof was bad and leaked in the living room. I ended up buying for a much cheaper price and put the new roof on for a fraction of the discount.

On the other hand I’ll sometimes replace a non-leaking roof on a house for sale, to allay buyer’s fears. One house that I sold had a roof that was at least 25 years old but didn’t leak. I replaced it with a new 40 year guarentee roof right before selling to give new buyers the assurance that they would not be having roof problems in the near future.
I usually use 40 year roofs on both keepers and flips. The cost of the shingles is only slightly more and the labor costs are the same.

David Krulac

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Jim, What was your total rehab cost? - Posted by Jim

Posted by Jim on February 05, 2004 at 21:07:59:

Can you explain the repairs you did. I really appreciate your help.

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I have a 160K home with dry wall damaged. - Posted by Jim

Posted by Jim on February 05, 2004 at 21:06:38:

I have a 165K home with dry wall damaged, Home is good condition. It is winterized so I dont know what else wrong. No electricity. Bank REO . I am planning to bid on 120K. It is in a hot are. Assuming I can come out with 10K repairs. I am sue they wont give it for 110K. Because the ;land value is 75K.

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That was a grate stroy! Glad you make it. - Posted by Jim

Posted by Jim on February 05, 2004 at 21:01:02:

That was a grate stroy! Glad you make it.