We bought this one from a wholesaler. We also decided to try out a new bank to finance this one. Not a good idea. It took so long to get everything established at the bank for this first deal that we had to postpone closing a few times. Not cool.
Project Challenges and Obstacles
This house had a ton of functional obsolescence. The kitchen was small and not very functional, there was a pass through bedroom on the second floor, the chimney went up thorough the center of the house and created living space issues on every floor, the Hvac ductwork was all wrong and had to be redone. There were 6 bedrooms between the second and third floors and only a half bath available on the second floor. The only full bath was next to the kitchen on the first floor and the kitchen itself was on the rear porch. The walls had lots of imperfections and had to mostly be redone. We had our work cut out for us, and a tight budget to boot! We started by demolishing everything and reconfiguring the second floor and the kitchen. We added a bathroom, eliminated the pass through bedroom setup, and built a nice master suite up there. The kitchen was expanded and brought up to date. We also eliminated the chimney, since it was in the way of everything. We uncovered plenty of knob and tube wiring, necessitating a complete house rewire, which was not in the budget. ( This is why it is essential to have a fudge factor in your numbers. There is always a gotcha!!) All in all the house turned out great.
We purchased this one for 65,000 including the wholsaler’s fee. Our purchase and carrying costs were 8000. The projected rehab budget was 70,000 but actually ended up at 79,000. Our selling costs including realtor’s commission and seller help was about 11% of the sales price of 225,000 so 24750. Our profit was 42250.
Don’t be afraid to take out the chimney. Consult with your contractor or structural engineer to make sure it is not necessary for structural support. Removing the chimney allows plenty of room to rework the layout in these older homes. Installing a 90 plus furnace that vents to the outside and using an electric hot water heater makes the chimney obsolete if there is no desire to keep the existing fireplace in the house. Make sure you have room in your rehab budget for gotchas. Don’t try to use a new lender for a deal unless you have a ton of time to close.