House #1: Financial Update

September 24, 2008 · 0 comments

It’s been about 5 weeks since rehab began on my first house (The Corn House), and we’re starting to near the finish line. Appliances, hardwood floor installation, some back-splash tiling, and a bunch of exterior work are all that stands between present condition and completion, and for the first time in several weeks, the house is starting to look like a house again.

My original budget for this project was $30,000, plus 10% for additional work and “surprises,” for a total budget of $33,000. As of today, we would come in right about $30K given our final material costs and our negotiated contractor costs. But, given what I’ve learned in the several weeks (as I completed another project in that time), I think I’m going to add a couple things to the Scope of Work.

First, while my GC has done a great job of tearing out the mess in the backyard, and doing some major trimming of the foliage around the house, I think it would be worthwhile to bring in a professional landscaper to tidy up some more, and perhaps make some recommendations on how to improve the curb appeal of this one. It’s a huge lot with lots of shrubbery, bushes, and trees, but I think the size of the lot is actually making it more difficult to create a nice landscape. So, I’m going to spend another $1000-1500 on landscaping.

Additionally, I’ll probably spend another $500 or so doing some more minor cosmetic work in the (unfinished) basement, such as throwing up some paneling over the one wall with exposed framing and running some electrical wiring/outlets so I can add some lighting to brighten the basement up. Lastly, there are a number of little detail items that I left off my original Scope of Work that I’d like to add in (like scrubbing the fireplace a bit more to get it clean), but it appears that my GC is losing some steam down the stretch, so I don’t want to leave any additional details to him; it will be easier to just spend another $500-1000 to bring in a handyman or two to tackle these final details.

All-in-all, it looks like I’ll hit my $33K target pretty much right on the nose. Adding in the purchase costs and a worst-case 6-months worth of holding costs, and my total investment on this property should come in below $100K, which was my original “all-in” target. So, while we’re not done yet, I’m thrilled that it appears I’ll be both on-schedule (within a few days) and on-budget for my first rehab.

Unfortunately, in retrospect, my biggest mistake on this property was likely my over-estimation of the resale value of the house. Originally, I expected that I should be able to generate a quick sale at $125-130K (leaving me about $15-20K in profit after selling costs, fees, and commissions), but in actuality, it would probably take a price of closer to $120K to get a quick sale in this market (maybe even less). So, while I’m confident I’ll make a profit on this one (my only goal for my first project), it may be less than my $15-20K target and/or may take a little longer than expected.

Hopefully I’ll have some final rehab numbers in another week or two, along with a more detailed analysis of what I should be able to sell this one for. But, all-in-all, given my initial goal of just making a profit on this one, I’m very happy with the current progress…

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