Rehab Horror Stories, Monsters in the Basement and Projects Gone Wrong…
My very first investment was a cute little 900 ft.² house on .6 acres of land very close to West Asheville. The house looked rough, and needed work. The neighborhood was also rough, and we suffered repeated theft and vandalism during the rehab process. We also found that most of the large lot was not usable, since a creek was piped under the front yard.
When we turned the water on, it leaked and sprayed everywhere. Our plumber dubbed it the Garjangulator 2000, and charged us $4700 to replace it all. Electrical and HVAC needed complete replacement as well. We also, despite a thorough inspection, missed a major foundation issue hidden in an extremely tight area of crawlspace, and had to tear out the floors, subfloors and joists to repair from above, then rebuild.
I was over budget, out of cash, and hadn’t even started the major cosmetic upgrades to add value to the home. I started working overtime, stopped paying my quarterly income taxes, maxed out my Lowe’s card and my regular credit card, and finally completed the project six months after starting what was planned to be a six-week cosmetic upgrade.
Insult to injury came when the home appraised for $111,000, $36,480 less than what we had spent. I had no choice but to take the resulting loan, leaving my entire life’s savings in a project that paid back about $1100 per year after mortgage and expenses- far less than the same money would do in the stock market.
Battered but undaunted, I took out a home equity loan and a personal loan, and found two homes sold together, in a decidedly subprime area of Swannanoa, one of which resembled a Dr. Seuss creation. The leaning chimney was tied to the house with two coat hangers strung together, and a large section of the foundation had been washed away and replaced with a huge pile of mulch.
Contractor delays and logistical hurdles put us two weeks from our lease start date with no running water, no closet, no kitchen, and an electrical system that would not pass code in Bolivia. I found myself jackhammering up the concrete slab at 1130 on a Friday night, hoping and praying that we could run a new sewer line, refill the hole with concrete, re-floor the entire downstairs, then coordinate the electrician and plumber to work overtime on the weekend so our tenants could move in as planned on Monday. It worked- but I no longer sign leases until after projects are complete!
In this case, the seller and I were both aware that the homes needed extensive work, and we started with a price that left us only $7,000 in the hole after appraisal, but with a remarkable, if decidedly funky, outcome.
All of these issues pale when compared to the stress inflicted by indecisive lenders, who have oftener than not flailed at the last minute, leaving us twiddling our thumbs at the closing table. Banks are the number one source of stress for real estate investors, and I’m very happy to be gradually becoming less dependent on them.
More recently, we purchased a home that seemed structurally fairly sound even on careful inspection, but reeked of pet urine even from the driveway with just one window open. We quickly dubbed this the Stinky House, and the name stuck- and stuck… Hundreds of hours of labor, 15 gallons of Kilz, new flooring, new trim, and 7 gallons of Pine Sol Later, we finally realized that we needed to start over, rip out the sub-floors, and rebuild most of the house to get the smell out for good.
This was yet another case where having a real job saved me. I’m fortunately able, by virtue of having another source of income through my VA medical work, to offer fair and reasonable prices for my project homes, and not sink if they go sideways. Truly professional flippers need to use every trick in the book to pay rock-bottom prices for every house they buy. I feel blessed to have the opportunity to give people a fair and reasonable price for their homes, no matter how pressing or uncomfortable their situation.