Work here has been tough to come by.
After spending most of this year, doing small handyman type projects, and being asked to underbid the unlicensed “contractors” on the bigger stuff, enough is enough.
I decided to take a shot at a rehab to sell project.(I hate the current vision of “a flip”) I’ve been watching a couple of properties for a while. The first one went, before I got my bid in. So, not wanting to miss the next, I made sure I had my financing ready.
A good prospect hit the market a week and a half ago. I got in to see it as soon, as I could. Then, got to work running some numbers, and comps. It looks promissing, so I put in a bid. Got the acceptance the next day, well below asking price. We close next week, and then It’s time to get dirty.
As a bit of background. The town here is trying to revitilize. They’ve had studies done, and one of the major flaws is a lack of decent reasonable housing. There are lots of older homes with potential, but major work needed. Beyond the scope of the average home owner. They could afford to buy, but to pay to have them upgraded right would be tough for most. And even mid range housing is very outdated, or poorly remodeled for the most part. You would’nt believe the 70-110K homes on the market with sheet paneled walls, and staple up or drop cieling tiles. (yeah, that’s mid range cost here)
My plan was to find an old home, with nothing more than good structure, and a decent lot, at the bottom of the market. We will do a complete interior and exterior rehab. Possibly, a small add a level addition, to raise the square footage. This isn’t going to be any fancy “fine home building”, just a nice quality ,modernized, energy efficient older home. The target sale price is in the range that would be affordable to a school teacher, cop, mill worker, most local middle class folks.
What I bought: An old 1890’s 2 story, on a double corner lot. Big lots are rare. It’s got 10′ ceilings on the 1st floor, and 8’s on the second. A stone, almost full height basement, in decent shape. The interior of the home appears untouched in almost the life of the house. That was a bonus to me, because atleast there isn’t a bunch of messed up remodeling to undo. The original layout is in tact. Pretty nice size rooms, for a small older home. The neighbor hood is a variety from a few rundown old homes, such as mine, to some nicely restored old victorians, and anything in between.There is a grade school about 6-7 blocks away, and the middle school/high school, is about 10 blocks away. The main street of downtown is 6 blocks away.
My last large project was a complete historical rehab of an old victorian, for a real estate office.That project rekindled my love of remodeling, after many years of mosly new construction.
I hope to be able to do a photo thread of the project, if I can keep up with the posts, and the work.
So stay tuned!
Brudoggie
Replies
Good Luck, I'm envious.......
I'd wait for the pictures! Brudoggie
I look forward to pix & progress!
Forrest
good luck,lets see some photos .
hardest thing is knowing where to stop.i have a hard time with that part.
if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Always,Yeah, I have the same problem. Thats partly why I found a house that pretty much needs everything.Now, keeping it on track financially will be the trick!Brudoggie
Glued to this channel!
Don't stare too long, you may fall asleep. We don't close for a few days yet.Brudoggie
Good luck to you. It should be fun. I've wanted to do the same around here for years, but the numbers never added up. I hope you can make a good go of it.Will wait for photos. I love untouched old places. Remember it'll probably be worth more in the end if you don't rip everything out.Steve
mmoogie,There isn't alot of great detail in it. Mostly just tall cielings, and windows. Brudoggie
sounds like a great project, but i don't have good feelings about the economy right now.
the reason so many people are sitting on the sidelines waiting is that prices are still coming down. why would you buy something today for $100,000 that will be worth maybe $90,000 next year?
and now there is not only the threat of home prices going lower, but the additional threat of "deflation" where all prices plummet. just look at the cost of gasoline frinstance, almost half of what it was just 5-6 months ago. what happens when that hits real estate? and all the things associated with construction/remodeling?
you should be fine if you are able to wait to sell, but if you have any time constraints on recouping your money you are taking a huge risk. on the other hand you may look like a huge genius a couple of years from now, but i still don't think the time is right to speculate.
as long as it will cash flow you will be fine. i just hope you don't get caught in this screwy economy which keeps surprising me every couple of weeks.
Name,I've got the same feelings. But, this is fairly low risk. I'd loose alot more money, if I were to win the bids, on the projects I've been presented lately.I live in a smaller rural area. We are shelterted from the big swings in rea estate.Brudoggie
If you don't completely know and understand the market you are going into you will regret TOTALY doing this.Most guys spend way too much money on the rehab . . . lose their profit margin and end up holding a nice home in a crummy neighborhood.....Then they end up renting it to people who very soon take it back to it's previous state.Cosmetics only...and keep your eye on the cost and the local average price for homes in your hood........This business is deceiving as all hell........be careful.
Polcat,Yeah, I know. I've been following local real estate for 20+ years.
One of the toughest parts for me will be curtailing my vision of done!Brudoggie
don't let Eeyore (namenotinuse) get you down! he's got some points, but people will always need housing, especially in that range. it's not like you're rushing into this the way every schmoe who knew a contractor thought he could become a flipper 2 years ago. the gas price analogy isn't useful. gas prices are going to go up again faster than they went down. mortgages are getting cheap again, possibly for the right reasons this time. my mortgage broker friend called today, having run the numbers, figuring it's now cheap enough for us to refinance and recoup the refi costs with lower payments. good luck!-m
Mikey,
Thanks for the encouragement. Brudoggie
Good for you!! Can't wait to follow the photos.
Doug
I hope it works for you in spite of the odds. If it does you are likely to be in a great position when the turn around does come..
What job oppertunities are there now?
What is the economic base of the neighborhood?
Frenchy,Jobs are pretty stable here. We have a few smaller regional manufactureres and technology companies that are growing, despite the economy. Plus a growing medical care facility.Not booming, by any definition, but what could be called "controlled growth".Brudoggie
Work here has been tough to come by.
You are over in Florence County if I recall. My wife teaches in Price county, and work is scarce there too. Price County has about 14K people in it, and in 2006 there were permits for 200 new homes. In August of 2007 there had been only 17 permits for new homes for the year. That's one of the reasons I still work down here in the Fox River Valley.
We looked at doing a buy and renovate too, but didn't find anything to both of our liking. (There is one old farmhouse that I still think about but DW put the kibosh on the amount of work to do there. It's a foreclosure that has been sitting for about 2 years now, with enough junk to fill a dozen dumpsters, including a freezer full of rotting food.) I am curious how much input your wife had in the decision, and what she thinks of it.
We also are looking at land to spec build a small cabin on and sell it. We put a cash offer on a place, but somebody paid the asking price and we didn't get it. Spent a number of days this year looking at cabins and land that have sold in the last 4 years, so i think we have a handle on that, but other than the place we offered on, it has been a fruitless search. Might have to look at a larger block of land and split it up.
The town here is trying to revitilize.
I'm not sure if anything in Price county is trying to revitalize, more like just hanging on. But there is a lot of public hunting land, snowmobiling, and 4-wheeler trails. One good point is Caterpillar bought a local manufacturing facility and has stuck a few million into upgrades, and added staff. Other than that things are pretty tight.
Bowz
Bowz,I've been looking at this concept for quite a while. Luckily, the house is fairly empty, Nothing worse, than paying to throw away somone elses junk. I'd account for that, by downgrading my offer, to cover, if needed.Actually, we got a nice old Baldwin piano, a nice little wood stove, and a few other antiques out of the deal. Being an estate sale, it was to our benefit, to take it as viewed. The sellers aren't local, and it saved them from having to deal with it. Actually, gave my bid some leverage.My wife, has been looking at these with me. She is also willing to add some labor, when available. I'm extremely fortunate in the support structure I have!This project is actually in the UP of Michigan. It wouildn't work, 15 miles away in Florence. There is a bad school situation going on there. We pulled our kids out 2 years ago. Still have a home there, but bought another one in Michigan, where we are living now. We'll move back after my son graduates, in 6 years. For now, its "camp".I've also looked at the camp, cabin spec. It seem marketable. The main flaw for me was the land cost. Just the land alone, would be double the investment I have in this house purchase. That's a longer rope than I want around my neck right now. Plus, I was concerned about travel costs during construction. I was figuring a minimum of 40 acres. There seems to still be a premium on that size parcel. That could change, if the economy stay flat. I may reconsider that after this is done and hopfully gone!Brudoggie
The sellers aren't local, and it saved them from having to deal with it. Actually, gave my bid some leverage.
Beautiful!!!!!!! That is an excellent example of looking for value in places other than the price!!!!!! My plumber did something similar on his first house, and got a bunch of antiques with the place.
As I recall the Florence school district was the first to collapse under the state's goofy funding formula. Haven't heard much else about it though, other than it got merged with the surrounding districts.
I was figuring a minimum of 40 acres.
No, that's not what we are looking for yet. we are looking at 5-10 acre parcels near large blocks of public land, or managed timberland, and near some public boat landings, ATV, and snowmobile trails. Unfortunately I haven't seen any indication that land prices are falling. OK, let me correct that, GOOD LAND prices are not falling. Swamp, poorly logged, and clear-cut land is available. Seems the only way to drive the per acre price down is going to be to buy larger blocks, but like you we don't want to be strung out too much right now.
Bowz
Bowz,No, Florence is still hanging in there, depite being the poster child for unfair school funding. They managed to pass a 5 year referendum to keep them alive for a bit longer. It only took 3 elections to get it through. I think they are on year 4 of that money. They seem to have managed to stretch it for 2 more years. Then its back to the polls again, for another bailout. I have serious doubts that another will pass, as there has been no percievable change in the state funding formula.My daughter would have been entering her senior year, when the money ran out. We thought that wouldn't be a good time to change schools. Particularly, because most others would be scrambling to do the same. We were fortunate to be able to afford to move, without having to sell our existing home. Sales are rough there, because of the school situation. Other than lake front, not much is moving. I think the market for rural land will cool a bit, soon. There is too much uncertainty in the economy. So it may become a bit more realisticly priced, but probably not much. Empty land and waterfontage are 2 things that will never grow in supply, so the deals will be very limited. If you can get into the 100+ acre parcels, the cost/acre is much better, but there are often access costs associated at that level. Look to large corporate holders to be shedding their extra land, and state sales. There are usually some good values there. My former boss picked up 240 acres, with frontage on 3/4 of a small lake for about 100k, not to long ago. It's a ways from civilization though. I would think there may be some oportunities in the Price Cty. area, as many in the 2nd homes there,may be under water, so to speak. More due to job cuts,increased travel costs, etc, than home value depreciation. Get to know the hometown bankers, and top realtors. They find these first. Keep looking. The way the paper companies have been closing mill, the valley may slow down soon too.Good luckBrudoggie
Brudoggie,
I'm in southeast Iowa, have enough work through maybe Febuary. Been thinking of doing the same thing. Have a person that would bank roll the whole thing.
He estimates that we would start to pull out of this around June or July of next year. He is a investor with Smith Barney. Did a hehab on an old victorian house for him.
So I'm thinking start looking around January. But am looking forward to your pics.
GaryS