We picked this one up off of the MLS. Normally I am pretty hesitant about rahabbing condos to retail but in this case the area sorely needed affordable housing in this price range and similar listings were going quickly. The unit is located in a desirable community and my partner Marcus actually has a rental in this area, so he was very familiar with the values. We felt confident that we could easily resell this one after rehab.
Project Challenges and Obstacles
Since this one was a condo it was a relatively simple rehab project. There was some mold left over from when the pipes had burst before we bought the property. The condo association replaced the plumbing before the purchase. The washer and dryer was located within the kitchen, which was rather unsightly. We decided to solve the issue by installing a large pantry cabinet and placing a single piece washer dryer, stacked laundry center within the cabinet. This gave the kitchen a clean look. The other issue we encountered was that the unit above had a lot of deferred maintenance. Their HVAC unit leaked water into our living room, destroying the ceiling….twice. It just so happened that this occurred after we finished the house and put it on the market. There was an elderly couple who lived above and we decided it would be best for us to just have our HVAC come and repair the leaking condensate line and cover the cost. Even though it was not our responsibility, we needed the issue resolved, and fast.
We purchased this one for $62,000. Our rehab costs were about $30,000. Our purchase, carrying and sales costs were about $21,900. We sold the house for $149,900 and our profit came in around $36,000. We used private lender IRA money for this one to finance the project, my favorite kind of financing!
There weren’t too many lessons learned on this one, other than that I kinda like condo rehabs! They are quick turn projects with no exterior rehabbing to worry about. Since a lot of the infrastructure maintenance is the responsibility of the condo association, there are not too many gotchas on these types of deals that can break the budget. The one thing to beware of though is that FHA will not finance a condo purchase in buildings where more than 50% of the units are not owner occupied. Condo communities will actually need to be periodically re-approved for eligibility for FHA financing. If they do not pass the approval process, it will limit the number of buyers who can purchase your rehabbed unit. It is very important to verify this as part of your due diligence before purchasing a condo unit to rehab for retail.