I still have a few last minute “tweaks” but I finally finished the rehab on 911 Worth.  I’ll pull together the final numbers and thoughts in a few days but I wanted to get the pics out so you can see the difference.  This should be available on MLS tomorrow at $179,900 using a flat fee listing service.

Some quick notes…
- I am fairly certain I ended up within $1k of my 40k budget.  Still waiting on a few final bills to come in…
- The glass on my wall oven was broken during the shipping to lowes so I had to order it again which cost another two weeks.  This is why it is not installed in the pics
- The floors look awesome.  I was able to find solid hardwoods for $2.65/ft which was well worth it.
- The rehab took way too long - 3.5 months.  This should have taken 8 weeks.  Basically one month was lost due to the holidays and I probably wasted an additional two weeks due to my own travels and inability to keep on top of things.

Check out the pics!  Click here for the FilmLoop of the before and after pics.

Things are finally moving forward at the Worth house.  The contractors started up again the 2nd week of January.  It is is amazing what a couple of hard workers can accomplish in a week.  They finished painting the cabinets, installing lights, doors, door knobs, trim and bathroom vanities, toilets, and lights.  I ordered the appliances but they are taking a bit longer than I had planned.

I held things up a bit the third week of January as I was travelling for work and wasn’t available for questions and purchases. Before I left I asked them to install a few additional items (shower doors, cabinet pulls, shutters, etc..).  I had planned to install these myself but knew I wouldn’t have the time.  It’ll cost a bit more but I’ll probably be able to get it on the market sooner.

We had a ton of rain the last couple weeks which caused my foundation to settle slightly after the foundation work and it caused some minor cracks.  No problem, the contractor patched and painted over them.

We also found that two of my kitchen cabinet doors were cut the wrong size so I need to go have two more made.  Not a huge expense but a pain to have two more cut and painted.

I had a garage door guy come out and shore up the garage doors a bit.  The doors were ajar which it made it appear that were foundation issues.  He fixed those and installed new handles/locks for $250.

This week will I’ll pick out the hardwoods and hope to have them installed.  I have a quote from the guy who installed my tile for $2/ft to install laminate hardwood.  I could probably find it cheaper if I kept looking but he did good work on the tile.  I also need to get a plumber out to fix the leak on the sewer drainage and determine why the master bath is backed up.

Once things dry out I need to get someone to clean up the yard, gutters and plant some flowers and shurbs.

I may purchase a power washer to knock off the dirt from the brick.  I’ll also get some paint matched for the outside trim and give some of the high visibility areas a fresh coat.

Last week I posted my freshspace sign in the yard.  Suprisingly, I’ve had a half-dozen calls on it from the sign.  I didn’t expect the sign to generate much traffic as the house is off the beaten path.   It is probably good that I didn’t post it too early since I really wouldn’t have known how log it’d take to finish the rehab.  I know now that I am 2-3 weeks from completion. 

I’ll have the final pics available soon!

The word is out - we’ve released phase I of dfwinvestors.net, including an awesome wholesale marketplace for DFW real estate investors.   Now you can purchase your next investment property at a 15%-50% discount.  We’ve got a lot more tools planned so check back often!

Wholesale Marketplace - http://www.dfwinvestors.net/list

I just checked the blog and realized it’s been over three weeks since I posted – shame on me. My excuse is that nothing much has happened on Worth street during the last couple of weeks. Things really slowed to crawl during the holidays.

During the first two weeks of December the contractors completed the drywall, painted the walls/ceilings and installed new 6 panel doors. Since the third week hit we’ve only completed the tile in the bathrooms and kitchen counter top. I’ll probably call the contractor today and offer him a $500 bonus if he can finish it all in the next 2 weeks.

I found that no single Lowes (nor Home Depot) store had enough of the bathroom tile I needed.  I really wasn’t that picky about the bathroom tile but I had to visit 3 different stores for to load up enough shower tile for the shower and bathtub.  What a pain.  

On the bright side, I did find cheap granite tile for the kitchen countertops at $2/sq ft at a local builder surplus warehouse. I also purchased the vanities, sinks, lights, fans and faucets. So far I’ve spent around $26,500 so I am on track to come in under my $40k budget.

While I was at the house one day, a guy was going door-to-door looking to rake yards. I had him rake and clean up the tree limbs/brush for $100. It took all day to pack up 65 bags of leaves and pile brush/limbs 10 feet high for the trash guys.  Now I just need to install a few bushes and flowers to complete the landscaping.

I don’t expect a lot to happen this week but hopefully we’ll get rolling again next week.

My goal on the rehab was to use a single contractor for the majority of the work.  I wasn’t too concerned with the timeline as I paid cash for the property, yet I didn’t want to manage a half-dozen contractors.  Sadly, a week before my interior rehab would have begun, the contractor I generally us died of a heart-attack.  A good buddy of mine gave me the name of another contractor so I called him as well as two other contractors I found in craigslist.

I created a complrehensive checklist (below) of all tasks required so I could compare the bids apples-to-apples. My plan was to request bids on the labor and then add the materials.  Looking back, I probably should have included some basic materials (drywall, texture, paint, etc…) in the bid. 

Demolition 
 bathrrom tile
 bathroom vanities
 wood paneling
 kitchen countertops
 flooring
 remove half-wall in entry
 kitchen cabinet doors
 remove crown molding

Construction 
 Install 6 panel doors & knobs
 Install bifold closet doors

Drywall/Paint 
 new drywall in kit/fam room
 repair all drywall (inc garage)
 texture all walls/celings
 paint all walls
 paint all trim
 paint cabinets and doors
 install new registers
 touchup outside trim
 repair garage drywall and spray

Tile 
 tile in bathrooms (floors/shower/bath)
 kitchen countertop granite tile
 kitchen backsplash tile

Electrical 
 Replace plugs/switches
 Replace light fixtures
 move plug in master bath
 install cooktop/range/dishwasher

Plumbing 
 Replace kitchen sink and disposal
 Replace bathroom vanities and sink
 Replace bath/shower faucets
 Pressure check

The first contractor, Don, I found in craigslist.  We walked through the property and he gave me a few some ideas on some additional improvements.  I asked him for a bid and his response was “I’ll beat any other bid.”  I told him I needed a price and he said probably 7k-8k but he’ll need to go through the checklist and run some numbers at home.  I could tell he didn’t really know how to bid the project as he was attempting to determine how much potential profit I had in the house - a bad sign.  Also, he only had one other worker so I knew the rehab would take quite a while.

Alex, the contractor recommended by a friend showed up and looked through the house.  He gave me some great ideas on easy improvements including spraying the – which was a great idea.  He had two crews working two projects simultaneously but he and his father handle the detailed work in the kitchen, bath, etc..  Alex walked through the house one more time then took the list and said he’d get back to me on a quote.

I called the third contractor, also found on craigslist. He was a one-man shop so I decided to pass as I knew it could take way too long for one person to do all this work.

A few days later I called Alex and he gave me the price of $8500.  I called Don and his price jumped to $12k.  I told him that I’d pass as I had a much lower bid.  I called Alex and scheduled the start after the foundation had been leveled since that’ll cause more problems with the drywall.  A few days later the house had been leveled (still fishing concrete, etc..) and Alex and his team were ready to start demolition.  I had a 20 cubic yard “roll off” delivered to the front yard.  Looking back, I should have paid a few extra bucks for the 30 yard as it filled quickly.  Within one day, the demolition was complete including the entryway, bathrooms, flooring and old crown molding.  I gave Alex $3k to start the next phase.

Unfortunately, when the house was leveled a couple walls were slightly damaged.  One wall became detached 3” off the floor and another was completely off square.  A potential buyer would have been scared off thinking there were more foundation problems.  Alex suggested they pull the drywall and repair the walls for $200.  Once they pulled it they found several of the studs were completely twisted so they replaced them, dry-walled and everything looked good as new.

One week later, new drywall was completed in the bathrooms and areas that were originally wood paneling, 50-60 areas have been patched and the old texture had been sanded.  Apparently the ceilings were a little uneven from the foundation movement so they fixed as much as possible then suggested popcorn texture on the ceilings as it will hide much of the unevenness.   I said him we’d stick with knock-down and risk the uneven look.  Obviously $180k buyers prefer knock down vs popcorn. I gave him the paint colors I had chosen and as well as $3k for labor and $700 for materials.  I made it clear that the remainder would be paid on completion.

Meanwhile I was working on locating new cabinet doors.  Fortunately, a friend of mine turned me on to a cabinet maker that charges $11 for custom MDF cabinet doors and $3 for drawer doors.  The cabinet doors included square molding, nice edges and “punch holes” for installing hidden hinges.  I also found a hardware store with hidden door hinges for $1.60 each.  Just add paint for good-as-new cabinets at just $600.

More to come…

I started taking bids on the foundation before the sale closed since that was the largest unknown.  I budgeted $8k for foundation plus $2500 for brick, mortar and concrete repairs.  The driveway and back patio were in poor condition so I wanted to replace those if the budget allowed.

Below are the three foundation bids I received:

Bid #1 – Jim – $11,325 – 34 pilings, mud-jacking, engineer report, plumbing test and cleanup.  It did not include brick/mortar repairs, caulking, or replacing driveway/patio.  Yikes - my foundation budget was already blown and it didn’t even include brick and mortar repairs.

Bid #2 – Vince – $7500 - 30 pilings.  It did not include mudjacking, plumbing test, mortar repairs or concrete driveway/patio.  I had used Vince before with success.  The bid was more reasonable but I’d also need bids for mudjacking, mortar repairs and concrete.

Bid #3 – Joe – $16,450 - 38 pilings, mud-jacking, mortar repairs, caulking, new driveway and patio.  This was high but I liked that Joe could handle everything including a new driveway and patio.  I told Joe that this was way too high but I’d consider just the foundation, mudjacking and brick/mortar for $10k.  He came back and said he could do this as well as the foundation for $14,400k.  This was $3500 over my budget for foundation and brick/morter but it includes a new driveway and patio as well.  I had to admit that I liked Joe because he called me several times to find out where I was with the process.  I’ll always prefer to work with a contractor hungry for my business.  I took it.

Originally Joe wanted half payment up front and half when finished.  While he was highly recommended by the next door neighbor I had never worked with him before so I agreed to 1/3 up front, 1/3 mid-way and 1/3 upon completion.

We agreed to the deal on 11/4/06 and before I could get over to take pics on the house they had started tearing up the concrete driveway.  In 4 days they had all the concrete hauled off, 34 holes dug and pilings set.  Another 5 days to complete the 4 pilings inside, raise the foundation and back fill the holes.

I knew I’d have an issue the street level side of the driveway slightly higher than the garage.  In talking with Joe he suggested we create a swale at the garage end and lay pipe under the driveway so I could add a sub-pump at some point in the future.  He just charged me $20 for the pipe.

We started the demolition inside during the last few days of the foundation work and I noticed a few large cracks under the carpet.  These would obviously need to be fixed before we could put hardwoods down.  I pointed them out to Joe and he fixed them the next day.  Joe also pointed out a hole in the bottom of the sewer drain the uncovered when digging.

Two days later (13 total), Joe called and asked me to inspect the work.  The pinkish mortar, normally difficult to match, looked good.  They pulled all the old caulk from the windows and between the bricks and re-caulked everything.  Joe gave me the lifetime warranty document and I paid him the final 1/3 payment - $14,420 total.

I purchased the property for $100k and plan to list it for $180k after rehab.  My goals are to stay within my $40k budget, continue to increase my rehab experience and blog the entire process.  I won’t do any of the work myself but the property is just 5 minutes from my job so it’s easy to drop by and check in regularly.  I’d prefer to work with fewer contractors with multiple skills vs. different contractors for each project.  

Below is my original budget derived from my previous experience with rehabs and “eyeballing” the property.  

Unfortunately, the contractor I had planned to use for the majority of the rehab work passed away of a heart attack the week I closed on the purchase.  Chalk that one up to “expect the unexpected.”

Oxford defines “anatomy” as a detailed examination or analysis.  I recently purchased a property in Grapevine which I plan to rehab and blog an anatomy from start to finish.

It was Tuesday, Oct 10th, 2006, when I was driving an older area of Grapevine looking for opportunities.  I noticed a property with phone books on the front porch, door hangers and an overgrown lawn - all good signs of a vacant house.  I parked the car and approached the house – sure enough, vacant.  Upon closer inspection I could see it had foundation issues and had never been updated since it was built in the 60’s.  I used my smartphone to search the Tarrant County Appraisal District and found the owner in Grandview.  I ran a quick 411 search and called.  Nobody home, but I left a message.  Later that day, I sent a post card asking them to call me as I was interested in purchasing their house in Grapevine.

On Friday, 10/13 I received a call from somone who had power of attorney for the owner and was interested in selling it. Unfortunately, they had just signed an agreement with a Realtor to list it.  This clearly wasn’t good news as the Realtor had likely set their expectations for a price and the seller would need to pay realtor commissions.

When I called Bill, the realtor, he said he hadn’t listed it just yet but they wanted $130k.  I knew that was too high (for me) as the ARV (after repair value) was approximately $170-$180k but needed a $30k-$40k rehab.  I decided to go ahead and look at the property.  Bill said I could come by anytime that afternoon since he lives next door.  “AH HA!  This is my chance,” I thought.  He obviously had a personal interest in finding an experienced and trustworthy investor to purchase, rehab and sell the property for top dollar.

As I met Bill, I made sure to show a personal interest in him, his neighborhood and his house.  This was as much about convincing Bill that I was the right buyer as it was about me viewing the house.  As we toured the house, I was taking notes and commenting on all the work the property needed.  I made it clear that I had was experienced with rehabs, had cash to purchase and was planning  a top-dollar rehab.
Once I had established my credibility, I told Bill that I’d only pay $100k for the property due to the amount of work necessary.  He said, “they’ll never take that but we may end up somewhere in the middle.”  I told him I’d think about it, and left.

The next morning I decided take my best shot at the property for $100k.  I wrote up the offer as-is, cash, no seller contributed closing costs, no warranty and closing in 10 days.  I requested a 7 day option period to get a foundation estimate - noted in the contract as the only contingency.  I knew that this deal was all about how Bill presented the contract to the seller so I included a cover letter (to Bill) with the detailed budget for the $40k rehab.  I reminded him that they may find a buyer to pay slightly more, but it could take 6-12 months in its current condition. I also included copies of two handwritten testimonials from previous sellers to help establish my creditability and trustworthiness.  I dropped the contract off to Bill and he said he’d get back to me on Monday.

Monday morning I received a call from Bill.  They accepted the offer with just a change to the closing date.  He made it clear that he is trusting that I’ll keep my word on rehab - obviously he went to bat for me.  I told him that I wouldn’t let him down.  We closed on 11/1.

In May of 2006 I located a neighborhood that was ripe for rehabs:

1. It consisted of 50’s-60’s homes, most of which need work.
2. It was one of the least expensive areas of a higher-than-average-priced city.
3. It was experiencing a revitalization.
4. The neighborhood had recently appreciated so owners had equity - assuming they didn’t refinance it out (some did).
5. My personal favorite - foundation issues! Sellers are generally aware of foundation issues and don’t want to deal with them. As investors, we know most foundation issues can be repaired.

I sent my first batch of 70 handwritten postcards to every house on two streets and received 14 calls. That’s right, 14 - a 20% response rate. One of the responses was from Betty, a delightful lady who had not lived in her home on Pine Street since she remarried, over three years ago. She had owned the home since 1956, raised her familiy there and found it difficult to let go. I told Betty that I was interested in purchasing her home if she was interested in selling. We scheduled a viewing for the following week.

TAD had the property listed at 1490 sqt, slightly larger than most in the neighborhood. Unfortunately, the house was only a 2 bedroom so i needed to squeeze in a 3^rd bedroom. Based on comps, I estimated the ARV (after repair value) was around $135k.

The following week I met Betty and her husband, Rex, at the house. The drive up appeal was great. I was glad that I decided to send letters to every house on the street as I wouldn’t have picked this house as a motivated seller on drive-by. I spoke with Betty and her husband for 10-15 minutes before entering the house. It is very important to establish a relationship with the seller before ‘getting down to business’.

The kitchen was updated in the 80’s so was slightly outdated, but in good shape. Betty added a large sunroom, master bath and walk in closet to the back of the house. The master closet and bath was huge for the neighborhood and was well updated. The sunroom could be converted to a 3^rd bedroom for a few thousand dollars. The wood paneling needed to be replaced - maybe $4k to tear it down, texture and paint. The foundation was a little uneven so I estimated $3k since it was pier and beam with good access.

I asked Betty what she wanted for the house. She said the man across the street told her was worth $130k. I mentioned that may be possible if the property were a 3/2 in perfect condition but she’d have a hard time getting that without a good deal of work. I said that I’d run some numbers and get back to her the next day.

I felt that I had a chance to purchase the property for $100k. But, with $10k of work, I knew that $100k would be tight for me to rehab or wholesale it. However, the property was in good condition so I may be able to sell it as a handyman special, as-is. I called Betty and offered $100k. I told her that I had cash and I could close it as soon as she’d like. She wasn’t thrilled with the offer and said she’d get back to me.

One week passed. Betty called and asked if I would buy it for $120k. ‘Sorry, 100k is all I can offer,’ I said. She said she’d get back to me.

Another week passed. Betty called again and decided to accept the offer if I would pay all the closing costs. I agreed. The next day we walked through the contract, step by step. She was a little leery so she asked to have her friend review the contract. A week later, she signed it. Since the property was vacant, I convinced Betty to let me hang a lockbox so I wouldn’t need to bother them with access for inspections.

As soon as I had the contract, I got an estimate on the foundation for $1200 and had a drive-by appraisal based on ARV (after repair value) which came in at $140k. I posted it at craigslist.com for $110k, as-is, no closing costs. I had 10 responses in the first 24 hours and showed the house a half-dozen times during the next 6 days. I closed on the purchase and had two parties ready to submit offers within a few days. I told them both to submit their best offer by Friday 5pm. I would not pay any realtor fees or closing costs unless the equal amount was added to the $110k asking price. The better of the two offers was $115k with $3k in closing costs. The sale closed 20 days later. After my utilities, appraisal and closing costs, my net was $9,641. Not bad for a few hours of work.

Looking back, I am proud of this deal. Not as much for the profit but that everyone €œwon€ in this deal. The seller didn’t want to mess with foundation issues, updating the property, realtors, buyer negotiations, etc.. She was ready to let go of the house so she received a fair price for a quick, cash sale with no contingencies. The buyers, a young couple purchasing their first home, got a great deal on a very nice fixer-upper in an upcoming neighborhood.

Lessons learned on this deal:

1. Build a good rapport with the seller. Betty sold me this house because she liked me and trusted me.
2. If the house is vacant, require the seller to allow you to hang a lockbox. Unrestricted access to the property is very valuable for a quick flip.
3. If you plan to sell it to a handyman or new investor, get contractor estimates and ARV appraisals on the property to ease their fears about foundations, valuations, etc..