House #36: Budget/Rehab Update

September 14, 2012 · 6 comments

We’ve been working on The WI-1 House for about 3 weeks now, and it’s been a mix of good and bad…

On the bright side, most of the contractors that we’ve brought in have been fantastic — they have been reliable, hard-working and high-quality. Unfortunately, we’ve run into a few issues with the house that have put a strain on the budget.

We originally expected to spend $75K on the rehab, but then decided to do some more extensive changes to the layout, which took our budget to about $95K. I was hoping we’d keep the budget around that range, but it’s now quickly escalated to about $105K, and there are still issues popping up every day.

Here are just a few of the things we’ve run into the first couple weeks:

  • When our permits were originally issued, the inspector refused to give us a deck permit without a survey. The survey is adding about $450 to the rehab costs.
  • After getting the survey, we realized that our property is a good bit larger than we originally thought; while this is a good thing for resale, it will require us to do a good bit more landscaping than we had planned — to the tune of about $1500.
  • We knew there was an old well that needed to be abandoned. We were told that we should expect the well to be about 100 feet deep, and that it would cost about $5/foot to have it filled with concrete and appropriately abandoned (which must be done prior to resale). Well, apparently this well was about as deep as our well guy has seen in this area, at over 350 feet deep! That meant an extra $1300 in cost to abandon it.
  • After opening up some ceilings in the kitchen to move some plumbing, it appears that the headers (the lumber that actually holds the house up along the structural walls) are cracked on three of the four walls. We had to have an engineer assess the damage and recommend some fixes so the house wouldn’t fall down — between the engineer’s time and the extra carpentry work, this added about $2000 to the budget.
  • Also, when opening up the kitchen ceiling, our carpenters noticed that the guys who built the house did some really stupid stuff. They notched out parts of the joists to build the floor (major no-no) and ran the plumbing through the wrong parts of the joists, potentially impacting the integrity of the structure. The carpenters brought in the city inspector to see what he would require be done…he wants the engineer to recommend something. Looks like more engineering and carpentry work, and some added expense.
  • Our carpenter took some measurements in the new master bath space, and things are a bit tighter than we had expected…to the point where the bath probably won’t look good the way it’s designed. So, we had to revise the shower/tub plan a bit, which will add some expense.
  • On top of that, to compensate for the inflated budget, we’ve decided to push the level of finishes up a notch, which will both increase the budget a bit more, but should hopefully increase the resale value as well.

None of these things is too terribly major in and of themselves, but when you put them all together — and with me being 1000 miles away — it makes for a good bit of extra work and stress. Once we get through our rough work and rough inspections, I’ll feel a little bit better.

I’ll be in Milwaukee again next week trying to push us through all the rough work, and get us ready for sheetrock, paint and trim, which should hopefully complete in the next 2-3 weeks.

6 responses to “House #36: Budget/Rehab Update”

  1. Out of state investing could be very risky. I have friends who does very well with a team of contractors that they trust. Where did you get your contractors from?


  2. Shane says:

    SURELY you still won’t lose money…not that I’d ever want that…it’s good to see you a little nervous. Reminds us newbies that you’re human 🙂

  3. J Scott says:

    Ken –

    We’ve spent a good bit of time on-site interviewing contractors and putting together a good team. It’s always a challenge trying to build a team, especially from far away. So far, I’m pleased with the contractors we’ve found…I’ve been less pleased with the house we picked… 🙂

  4. J Scott says:

    Hey Shane,

    I’m hopeful that we won’t lose money. While the comps still seem to support the sale price we have planned, there are a whole bunch of things that could go wrong — the biggest being that if we don’t get the house on the market soon, winter will be here and our buyer demand will dry up quickly.

    I definitely still get nervous here and there, and it tends to be right around this part of my projects, when we have all the walls opened up and we’re finally getting a glimpse at all the problems that the house has provided us. I’m in Milwaukee this week, and I have a feeling it’s going to be a stressful trip… 🙂

  5. CARLOS says:


    I just bearly starting to get out of the nutshell in the flippping house business.
    My main concern is the funding of the first projects everybody talk about get a private investor I have been dealing with hard money lender offer and their letter to get my first deal but I notice they offer 65 to 70 percent but in addition they charge $500 for inspection $400 for office paperwork and 6% that I have to cover at closing then the points what you will recommend to me or in what way you can enlight me to do my first flip dealing with the funds. I’m in San Antonio, TX. I will appreciated the time you will take to answer this e-mail.

  6. J Scott says:

    Hi Carlos,

    There is no quick answer to your question. Finding funding is one of the hardest parts of this business, but obviously, also one of the most important. Start with family and friends and determine if there is anyone you know that can help you with funding. If that’s not an option, start talking to people like doctors, lawyers, etc who may have money set aside in their retirement funds and are looking for better returns (that you can provide them). And the next option is hard money. It’s expensive, and you’ll need some of your own cash, but if all else fails, it’s the best way to go. If you don’t have the cash to supplement the hard money, the last option is to find a partner who can provide you with the money; in return, you find the deal or somehow provide other support and get a cut of the profits for your time and effort. You may not get equal partnership if you’re not providing the money, but anything is better than nothing.

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