A friend decided to go in with his brother to buy an unfinished house for practically nothing and bring it up to date and sell it to make lots of money in just a few weeks! This would be an easy money. They bought the house on April 1(that should have been the first clue). They paid just $25,000 which included closing costs and taxes. So let’s see what happened to this rehab project.
First they had trouble getting a clear title to the property as there had been several divorces in the past and the various necessary releases hadn’t been signed. So after some legal fees and delays, everything was cleared up and the house was now theirs. Now these two fellows knew how to build things and would do the job right for sure always keeping their eye on the profit to be made. It took them nearly two months to get the title cleared. They spent cash to buy the property and then more for legal fees. $25,000 + 1,500 legal fees = $26,500 spent so far, not bad.
They now go to the house and see that the 2 acres has overgrown completely and you can’t even get to the front door! So they hire a fellow to bushhog the property and then a mowing guy to come in and finish. But its summer so they have to have the mower guy come every week just to be able to drive up the driveway to the front door. So bushhog $150 + $75 per week to keep mowed (guessing it will only be for 6 weeks = $450). So now they have spent $26,500 + 150 + 450 (if only for 6 weeks) = $27,100.
But the long driveway is in need of base gravel and then a topcoat and there is no walkway to house, just grass and no decks to doors. So there goes another $3,500. $27,100 + 3,500 = $30,600.
Now they are ready to begin but discover that the county water hasn’t been hooked up, so they have to pay another $1,200 to have the hookup and then another $800 to have the lines run to the house. They can do the hookups inside the house themselves and save a little. $30,600 + 1200 + 800 = $32,600.
The siding has some bad pieces and missing a few pieces and really doesn’t look that nice so they decide it would be best to re-side the house completely for a new and fresh look that surely everyone will want. They take off the old siding themselves and add new siding thus saving labor. Siding costs them $1,800 in material costs. $32,600 + 1800 = $34,400.
Thankfully the windows and door were fine so they didn’t have to do anything there but the home had sat empty for awhile so vandals stole all the copper plumbing and appliances and damaged the flooring doing such. So they had to replace all the plumbing and repair walls, buy new appliances and decided it would be nice to have all hardwood flooring like on those TV shows. But when they priced the hardwood they decided laminate wood floor would have to do. So they figured 1,200 for plumbing, 800 for stove and dishwasher and $1500 for flooring in this 1400 sq ft house if they do the work themselves. $34,400 + 1200 + 800 + 1500 = $37,900.
Then there were the missing cabinet doors in the kitchen that had to be replaced but no replacements were to be found so they hired the Amish to build the missing doors. Just $180 and the cabinets looked great again. They decided new trendy faucets were needed too, so add another $350 for the kitchen and two bathrooms. $37,900 + 180 + 350 = $38,430. Now they are beginning to feel a little uncomfortable with spending more money as their perceived profit is dwindling fast, it has taken them three months to get this far…so the grass expenses, the utilities, the insurance, taxes, water bill are beginning to add up. Another $1800 spent! $38,430 = $40,230.
This isn’t as fun as they planned and their own jobs are demanding attention so they aren’t getting the work done like they planned. A few little disputes and things begin to frey. They decide to hire out the painting and that costs them $1200 and takes even longer as the painters can’t come when they need them, so delays occur. $40,230 + 1200 = $41,430. But that’s okay they say as they plan to sell it for $75,000 so some profit can still be made.
They finally finish inside but decide to add a new hot water tank and new a/c but neither has time to put it in so more delays. It is now late August and the house isn’t ready. But they decide maybe they should go ahead and list the house anyways and contacted a realtor who they didn’t meet or know anything about but hey, a realtor is a realtor, right?? They imagined the buyers pouring in and loving the house in their minds, all they have to do is just sit back and wait. And that is exactly what happened. Two months passed and they had no buyer or even lookers! They call the realtor who is surely taking potential buyers to see the house and running ads on MLS only to discover that nothing has been done! How can that be, the house is charming and in a great neighborhood? She says lower the price, so they do. Nothing happens for another two months so they call again and again are told lower the price. They are now down to $52,000 and 7 months into project. Countless hours and sweat on their part and the profit is fast dissolving. Now they are paying more and more monthly costs and that grass keeps growing. Winter is approaching so they have to leave the furnace on to keep the house warm and all the interior safe from freezing so more bills. Still nothing, realtor says lower price but this time they say no, something has to be wrong. There isn’t going to be any profit or even pay for the work they did, so what can they do? Remember their expenses are already over $41,000 and adding up fast still.
They contacted us with their sad story. We took a look at the house and agreed it was worth $75,000 and should have been sold quickly at $52,000 so why didn’t it sell? Now we take a look at the realtor’s listing and see that there are no photos of interior or lot and only one photo of exterior but it is before driveway was installed and grass mowed and had been taken from road so you could barely see the house! The ad said 800 square feet and it was 1400 square feet. No other details were given about the house. No glowing writeup telling people about all the wonderful things inside this lovely home, nothing, nada. And to top it off, there was no “For Sale” sign in the yard, so how could anyone know it was for sale? Just what was the realtor doing to earn her commission? These things must be corrected immediately.
We did make a few suggestions on how to better present the house. Sure, they had done all the necessary things and made it very livable but they overlooked the feminine touch. There wasn’t anything welcoming you into the home. The front of the house was bland and uninviting. Who was going to come inside or even look at the listing if it didn’t look more appealing than this. Men don’t always think about curb appeal and it is really important. Remember buyers are looking at tiny little pictures of houses, so you have to have a great photo to get them to click on it and see what you have to offer!
The bad news is that although they took our suggestions and began working on curb appeal, they are stuck with this realtor until January which means more monthly costs will be incurred and they are going to have to spend more money to get that curb appeal. The moral of this story is that even if you know how to do the work you might not know how to attract buyers and find a good realtor. Don’t allow things to slip by without following up and lose precious time during the selling season. These brothers may still make a teemy profit but not the one they had hoped for. This could have been avoided if they had contacted us early in the project, perhaps flipping it to us then and making profit and leaving the rehab to us. Remember we pay CASH for HOUSES – call us!