Project Acquisition
I originally found this one in a website called Hubzu, an online auction site. They had a buy it now option available so I instructed our agent, Chris Lewis of the Schiff Home Team, to “buy it now”. However, before we could submit t he bid, literally while our mouse hovered over the buy it now button, someone bid the house beyond the buy it now price. I thought we had lost the deal, but it ended up coming back to us for a second chance offer when the high bidder did not come through. We purchased this one for 123,000.
Project Challenges and Obstacles
The rehab presented a unique set of challenges. The house i s set up as a split level with the kitchen and living room and three bedrooms on one level, the family room on the lower basement level, and a third level which has the master bedroom area. We decided to turn this third level into a master suite. We added a large bedroom on this level and closed in the stairs leading up to this floor so that it was more private. We then reconfigured the layout on this floor so that the bedroom was made larger and there was a separate seating area. The basement presented a unique challenge in that the walls and ceiling were textured. This finishing technique really dates a house and is definitely a negative with homebuyers. Unfortunately our budget did not really allow us to put up new drywall in the whole space so we ended up skimming the walls and ceiling with drywall compound. This allowed us to get smooth surfaces relatively cheaply. The kitchen was rather small so we took out a few walls to open it up. There was a rear patio off the living room that had an existing roof. It looked fine as is, but we realized that if we closed it in and provided a vent for heating and cooling, we would be adding a few hundred square feet to the living space and increasing the after repair value of the house. It wasn’t really in the budget, but the positives outweighed the negatives and we closed in this space to make it a finished room.
Project Analysis
Our rehab budget was $70,000. This was a challenge to calculate because we knew we had a tight budget for what we wanted to accomplish. We needed to fix what was wrong with the house and make it “pop” without popping our budget. It was a careful decision making process, balancing our wants with what was really necessary. For example, we had a rear fence that was an eyesore and needed repair but was definitely not in the budget. Despite really wanting to put in a nice new white vinyl fence, we ended up repairing, not replacing it. That would have really put us over budget. We ended up all in at $260,000 This includes all purchase rehab and sales and carrying costs. We listed the house for $279,000.
Our sales costs were about 11% ($30,690) of the list price so our profit was 18000. Check out the pictures! Let us know what you think!
Take Aways
When the budget is tight, you have the tendency to not rehab the house 100%. (In this case leaving the fence instead of replacing it. And not replacing some of the windows with broken seals) this can lead to problems such as the buyer offering less for the house because they perceive it to be not completely done. So by not spending the extra money, you end up losing more on the sales price. I call this the rehabber’s trap.
