Do NOT go over budget on your rehab!! How not to lose your shirt… and mind
BIG MISTAKE!!! Number 3. Spending too much on your rehab!!
One of the questions I had starting out was, “How do you know how much it will cost to do… that?”
The more work the house needs the more your budget can get out of whack. Out of whack means broke broke broke!! When you walk into a house the first time, think to yourself “how close to livable is this house right now?” If the answer is carpet, paint and a new roof, then that is a good one to start with. If the answer is demo to the studs, new electric, plumbing, roof, air conditioning, add a bath, add a dormer ADD A NIGHTMARE!! An easy rule of thumb is to start with a house built after 1978. Save the 1900’s craftsman for after you’ve built up a bit of a financial pad, you’ll need it!! Crawl first, then walk, then run.
My second flip was a great Stone Tudor in East Nashville built in 1910 (RUUUUNNNNN). It was almost perfect on the outside!! New roof, Stone had been re tuck pointed (new mortar in the joints between the stone. You’re learning already!!) The inside was another story… The previous owner had redone windows downstairs and redone all the drywall. Trim, Carpet and paint and it would be looking good! Except, they decided to put all the new drywall over
1. Old electric (old is when the plugs only have two holes instead of three, can be a hazard)
2. Old plaster that was caving in (plaster feels like cement, if you knock on it, like you would a door, it will hurt your hand. It doesn’t sound hollow, and its usually a bit bumpy)
3. Paneling that was like the duct tape holding the walls together. Lots of paneling was used in the 50,s and 60’s to remodel the older houses. I consider this a sin!
It all had to be torn out!!! Big bucks!! To make a long story short, this was just the start of what turned out to be a money pit. I spent twice what I had originally budgeted!! Luckily, since I had purchased the home well, I still made a little bit of money. A very little bit… I could have made more flipping burgers instead of houses.
You do not tell a house what it needs to be redone. It tells you! It is your job to ask the house the right questions. If you cant, then it is your job to hire someone that can. Get 3 General contractor bids and average them. This should be done when you have the house under contract WITH AN INSPECTION CONTINGENY.
Ill be more in depth on specifics of what we pay for things in 2011 later on in the blog. This should be enough to scare you away from the money pits!!!