Author Topic: Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE  (Read 943 times)

sammybiker

  • Stubble
  • **
  • Posts: 219
Iíve enjoyed contributing (and learning) in my last couple of threads here at MMM and wanted to start another to capture some on-going adventures in purchasing single family properties, managing the rehab from afar and ultimately renting out the properties.

Goals

1)   Buy (5) single family properties in 2018 and get them cashed out into long term mortgages

2)   Purchase under market and achieve a minimum of $40k in equity per property after all repairs are completed

3)   Cashflow $250-400/mo after expenses & debt service per property

Funding

1)  A single line of credit established on an existing single family property

2)  Private money from existing private money lenders that I've worked with over the years
 
3)  New lines of credit that I'm currently in the process of setting up on existing properties - probably will not be established until late August

Background

I work in oil & gas and Iím currently on assignment in Mexico and will be here for another 10 months.  The area Iím focused on purchasing in is Southeast Texas, where I know the market, rents are strong and rising, housing supply is limited and there is major capex expenditure committed to the area over the next 10 years.

The Team

1)   Project coordinator Ė my boots on the ground.  This is our first project together but weíve built a relationship over the last few months and heís an active investor in the area.  Solid guy, organized, communicative.

2)   Various contractors, some that Iíve worked with before, others only via reference.  Despite not being in a HCOL, contractor prices tend to be higher in Southeast Texas due to labor demand in the area.  A high school graduate that wants to work 60-70 hours a week can make $80k+ and those with further aspirations can make much more in supervision.  So trying to find a decent contractor at a reasonable rate is difficult.  Hurricane Harvey has further compounded this problem as rates have skyrocketed.

Previous Threads

https://forum.mrmoneymustache.com/real-estate-and-landlording/anatomy-of-a-mostly-dyi-renovation-on-a-budget/msg1514890/#msg1514890

https://forum.mrmoneymustache.com/real-estate-and-landlording/my-long-distance-lease-option-flip-project/

Letís get started.
« Last Edit: June 14, 2018, 08:47:59 AM by sammybiker »

sammybiker

  • Stubble
  • **
  • Posts: 219
Property #1
Purchase Price:  $83k
Estimated Rehab:  $52k
Estimated After Repair Value: $230k ($100 sq ft)
Estimated Monthly Rent:  $1800
Source:  MLS
Funding:  Purchasing cash via line of credit, private money
Schedule:  6 weeks (11-June through 23-July)

This 2300 sq ft home is in a premier local neighborhood consisting almost entirely of owner-occupants.  Two level, two car garage on a large lot.  My project coordinator has a flip on-going in the same property that went under contract at $111/sq ft and there are another couple coming on the market at $105/sq ft (expecting over asking), so I feel my comps are conservative at $100/sq ft.

This house flooded during Hurricane Harvey with the lower level being impacted.  The remediation was performed prior to myself purchasing it and I obtained the certificate with the closing documents.  Being that this is my first flood rehab, I did a good bit of research prior to purchasing and also put in a good bit of padding in the scope of work.

Scope of Work Summary:

Insulation and drywall for walls on the first floor.  Doors, door trim, paint, baseboards, flooring, kitchen and downstairs bathroom.  The previous owners were living in the house, upstairs, so I know that HVAC, electrical, plumbing and water heater is probably OK.  The intent is to leave the upstairs as-is, clean the carpet and repair the carpet on the stairway (see photos below).

This is a rental property and I donít want to over renovate.

Scope of Work Details/Estimate:  (first pass, before getting inside the property or getting contractor bids):

Drywall (Walls) floated & taped all-in @ $7500
Insulation all-in @ 1500
Paint all-in @ 3000
Flooring Install/Carpet Repair all in @ 3500
Floor Baseboard all-in @ 1000   
Door Jam/Trim all-in @ 750   
Kitchen Cabinets all-in @ 5000
Kitchen Countertop all-in @ 1500
Kitchen Sink/Faucet all-in @ 300
Dishwasher all-in @ 600
Used Fridge all-in @ 350
Used Stove all-in @ 350
Bathroom Vanities (x1) all-in @  800
Bathroom Shower (x1) all-in @ 3000
Bathroom Toilets all-in @ 300
HVAC all-in @ 5000 (left in as contingency - HVAC operating OK)
Hot Water Heater all-in @ 800 (left as contingency - Water heater operating OK)
Interior Doors all-in @ 2000
Interior/Exterior Lighting all-in @ 1000
Electrical all-in @ 1000
Plumbing all-in @ 1000
Misc all-in @ 10000 (being my first flood house and limited inspection performed, I'm leaving $10k missed scope/overruns) 
Project Coordinator all-in @ 1800
TOTAL @ 52,000

Listing Photos:

3c77482868548bf85d70b76261c1f240l-m1xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m14xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m13xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m6xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m4xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m5xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m3xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m2xd-w1020_h770_q80 by sam burn, on Flickr


3c77482868548bf85d70b76261c1f240l-m8xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m9xd-w1020_h770_q80 by sam burn, on Flickr
3c77482868548bf85d70b76261c1f240l-m10xd-w1020_h770_q80 by sam burn, on Flickr

« Last Edit: June 12, 2018, 08:21:45 PM by sammybiker »

Dicey

  • Walrus Stache
  • *******
  • Posts: 7756
  • Age: 60
  • Location: NorCal
Woo-hoo! First to PTF. Cannot wait to see you succeed!
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

sammybiker

  • Stubble
  • **
  • Posts: 219
Good to hear from you Dicey!  And thanks.  Hopefully I'll be done buying houses after this year.  I told myself that after the last one but after a few months break, I got the itch again :P

The interior concept will consist of grey walls, white ceilings, dark floors.  Concept photos below...

Grey Concept 1 by sam burn, on Flickr

Grey Concept 4 by sam burn, on Flickr

Grey Concept 3 by sam burn, on Flickr

Grey Concept 2 by sam burn, on Flickr



Some budget updates based on actual spent...

Drywall (Walls) floated & taped all-in @ $7500 actual $7926 all-in now.  My materials estimate was short.

Insulation all-in @ 1500 actual $1367 all-in now.  My material estimate was a little long.

Paint all-in @ 3000 actual $3950 all-in now.  My materials were based on lower quantities (painting only downstairs).  After feedback from the coordinator and others, I'm going to repaint the upstairs as well as the downstairs for better flow and to eliminate any lingering flood water smell.  Same goes with the carpet, see below.

Flooring Install/Carpet Repair all in @ 3500 actual $6000 all-in now.  The upstairs carpet soaked up the flood smell and will be ripped out.  I'll run the same dark laminate upstairs as I am downstairs.

Floor Baseboard all-in @  1000 actual $1750  all-in now. Updated to include increased quantities per the above.

Insulation and drywall kicked off yesterday. Paint delivered yesterday and will start upstairs today.

The flooring/kitchen/bathroom contractor went through yesterday to assemble his estimate.  Waiting for that to come back and it should be interesting.  This guy is new to me but comes heavily referenced from guys I trust.  Just worried he may be coming in too high......always fun seeing how your estimates mate up to actuals :)

I'll post progress photos tomorrow.
« Last Edit: June 13, 2018, 11:18:03 AM by sammybiker »

sammybiker

  • Stubble
  • **
  • Posts: 219
Update 

Drywall started Monday and texture finished today.  The project coordinator will inspect this afternoon and pending his approval, we'll release paint to downstairs on Saturday.

No pricing back yet from the flooring/bathrooms/kitchen guy, still waiting.  Sent a second contractor in to put together another estimate this afternoon.

IMG_20180612_160226801 by sam burn, on Flickr

IMG_20180612_160156054 by sam burn, on Flickr

IMG_20180612_160128714 by sam burn, on Flickr

IMG_20180612_160124545 by sam burn, on Flickr

IMG_20180612_160117358 by sam burn, on Flickr
« Last Edit: June 15, 2018, 12:31:05 PM by sammybiker »

sammybiker

  • Stubble
  • **
  • Posts: 219
Need some input from the forum - what to do with this fireplace??

- I was thinking of installing some white brick vaneer or fixing the existing and painting it white?

- Would rather just remove it but I believe the cost of doing so once the roof is repaired, etc. is not efficient.  Plus possible loss on resale/appraisal.

- Frame up a simple mantle around it? 

7ddfdb9b50672cd8bb78d02de0f46074b5b97f57-1 by sam burn, on Flickr

a169a6327290d3cf6c08f40d87d907572c816da3-1 by sam burn, on Flickr

A photoshop representation of option 1...

White by sam burn, on Flickr

sammybiker

  • Stubble
  • **
  • Posts: 219
Update

Property #1:  Painting started yesterday, on-going today.  Finalizing quotes for flooring, trim, kitchen, etc.  Pretty happy with my contractor choices and everyone is getting along well.  Hope to have some progress photos of the paint later this weekend.  Received feedback from a neighbor that this house was rented out before at $2,000/mo.  Good news!

Property #2: Under contract but slowly turning into a monster.  4bd/3ba 1800sq ft partial brick in a nice neighborhood, best zip code, good schools @ $84.5k, after repair value being $158k.  Gross rents will be $1600/mo.

Originally thinking this was  $20k cosmetic - ha, no.  Wasn't able to get into the house until well into the inspection period and it looks like I'll be replacing the roof, ceiling, flooring, bathrooms and worst of all the HVAC.  Budget was roughly intact until the HVAC hit.  Current setup is non-functioning, non-confirming and dangerous.  Talking with my guy, we're looking at entire new ducting with mini splits + hacking up the existing upstairs floor to get to it.  Rehab looking at about 55k right now.

HVAC guy is going back in Monday to perform a detailed take-off and inspection package so I can hammer the sellers for 1) lack of disclosure and 2) a lower selling price.  After discussing all this with the project coordinator this morning, I'm going to need a price reduction from $84.5k to $78k to make this work.  If not, I'll walk away.

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4385
Love your work.

I would remove the fireplace if it were feasible.  Looks heavily damaged and it breaks up the space. 


sammybiker

  • Stubble
  • **
  • Posts: 219
Thanks AR for your comment!  You gave me some great feedback re: the PHX market three years ago - thanks again for that.

Update

Property #1:  Paint has been completed and it looks good.  Flooring will be delivered next Monday and I'm hoping to start on it by Tues/Wed.

The original contractor that I had high hopes for to finish the house came in sky high on his estimate - $26k for flooring upstairs and down, baseboard, bathroom, doors hung, door trim, kitchen installation, stair repair and dealing with the fireplace.  Labor only (lol).  No doubt this guy will perform top notch work but after respectfully grilling him on prices ($3/sq ft for click lock laminate flooring install - I can install 200q ft per hour myself, 350sq ft per hour with a helper), $3/linear foot for baseboard - man, come on...with a nail gun, you can do a house in a day.  Just nuts prices.

I sent it out to estimate again, my drywaller/painter came back with a decent price and we're moving forward.  I'll update the scope of work prices later this week but in short, we're doing all flooring, baseboard, doors hung, door trim, refreshing upstairs bathroom (paint), total downstairs bathroom rehab for $10.5k.  Kitchen install will be sub'd out to an all-in specialist for a $3k install fee and I've still yet to figure out what the hell to do with the fireplace - received a 3.5k estimate to drywall/stone veneer over it - we'll see.

Property #2:    Per the inspection results and the $20k+ HVAC repair required, I sent the inspection report and requested a reduction in price to partially cover this.
 This offer was refused.  No problem, I requested a termination of contract and my earnest funds returned citing inspection results.

Because the inspection report was not issued until a couple days after the inspection period (inspection was pushed back due to sellers agent not being available to let the inspector into the house), the seller refused.  I requested return of 50% of the earnest funds, to cover my inspection costs.  Seller refused.  Seller started saber rattling about suing due to failure to execute the contract.  Blah.  I issued instruction to the title company to release the earnest funds and let's move on to the next one.

Sellers come back nonetheless, threatening to sue this morning.  Ahhh, fun.  On the phone with my attorney, working on issuing them a nice letter to cease legal suit and hopefully we can move on. 

The sellers are in foreclosure (unknown amount), so I can understand their desire to get the house sold.  Unfortunately, the pre-inspection price won't work.  It's tough that they won't accept my earnest funds alone and move on.  99% chance they are saber rattling w/the lawsuit stuff but incase they aren't, I'm ready to play ball.

The search for property #2 continues.  A couple wholesale deals popped up this week, which I'm taking a look at.  I won't post here unless I'm under contract - obviously, I'm making a lot of offers and most don't go anywhere.  But in real estate, like many things, it may run dry for months and then when it rains, it really pours.  So I need to remain patient
« Last Edit: June 21, 2018, 07:05:11 PM by sammybiker »

sammybiker

  • Stubble
  • **
  • Posts: 219
Now for some photo updates of the interior paint - poor quality photos but something to document the progress.  The wall gray was a lot lighter than I wanted but I had to make some sacrifices to keep the contractor moving - my first choice was backordered a couple of weeks.

ALSO - I'm looking into painting the exterior and possibly adding some trim to pop like the below - thoughts?  I would leave the brick as-is (just power wash it to remove flood related grime).

Excuse the mess in the progress photos, it's not my contractors fault - I have a 10yd dumpster on the way to clear it all out.

Screen Shot 2018-06-21 at 7.23.21 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.22.12 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.59 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.50 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.40 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.33 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.14 PM by sam burn, on Flickr

Screen Shot 2018-06-21 at 7.21.04 PM by sam burn, on Flickr
« Last Edit: June 21, 2018, 06:55:32 PM by sammybiker »

sammybiker

  • Stubble
  • **
  • Posts: 219
Budget/scope of work update showing the original 12-June estimate vs where we are today 22-June.

Certainly some growth but nothing insane.  I've applied $5,000 of the misc/unscoped budget line towards some of this growth, namely the fireplace.

If we can keep this on track without going over the remaining $5,000 allowed for misc, we're good.

Below are all-in numbers, including both labor and material.

FloodRehabUpdate by sam burn, on Flickr
« Last Edit: June 22, 2018, 04:57:42 PM by sammybiker »

Grif

  • 5 O'Clock Shadow
  • *
  • Posts: 11
  • Location: Where there is no icing problem
Wow your total estimate was really close! I'm a real estate newb but your posts are very informative and it looks like you are getting work done pretty efficiently. I'm just commenting to say good luck haha!

sammybiker

  • Stubble
  • **
  • Posts: 219
Thanks Grif.

My estimate wasn't awful for never personally seeing the inside of the property but I need to improve and get my team to improve.  The fireplace bust should have been something I picked-up on.  But it's always a learning experience and I tend to absorb knowledge by paying for it - harder to forget that way :)
« Last Edit: June 23, 2018, 05:31:22 PM by sammybiker »