Mar
4
Preliminary Budget for 1002 S. Main St. Property
March 4, 2007 |
With all my previous jibber-jabbering about areas of potential profits in a flip to focus on, here’s my preliminary plan, along with some rough estimates of cost. I don’t have measurements for precise square footages and there are a few uncertainities here and there, so this is very much a rough draft, as far as the budget side of it goes. One thing to keep in mind is that the house is a 1930s era 3-1, 1300 sq. ft. house and very much in the starter house category.
Kitchen: The kitchen is the only place I plan to actually take out a wall, just to buy a bit of extra pantry/storage space. It’s a bit hard to describe, but the third bedroom and the kitchen share a common wall, which is the back of the closet in the bedroom and the side of the pantry, in the kitchen.
The closet in the third bedroom, though, is currently where the hookups for the washer and dryer are, which is obviously less than ideal. The plan is to knock out the common wall the pantry/closet share, and simply dry-wall over the closet opening in the bedroom. That’ll leave a much larger pantry area where the washer/dryer would be located. The third bedroom won’t have a closet at all (and is too small to frame a new one in, even a shallow one), but them’s the breaks sometimes.
I’m going to paint the existing cabinets white but otherwise leave them alone, replacing the hardware. The stove and fridge aren’t new but they’re new enough. The flooring is vinyl tile, which I’m going to rip up and replace with ceramic tile (nothing fancy, and likely the same ceramic tile I use for the flooring in the bathroom). I’m on the fence about tiling the countertop. It’s a newish countertop but I don’t like the color much, as it’s a pinkish color. If I can make it look decent with the color of the ceramic tile on the floor and paint choice for the walls, I’ll keep it as is. If not, I’m going to tile over it.
The ceiling is currently old hideous acoustic tiles, but it’s got original tongue and groove ceilings underneath. I only pried off one tile but it looked to be in good shape. If the entire ceiling is in good shape once the tiles come down, I’m going to try to sand it all down to lighten up the wood color some and stain and seal it a very light color, with crown molding along the edges. If that’s not possible, I’ll probably go with beadboard to cover the ceiling. If I were having lots of other drywall work done I’d probably go with that, but what little I’m doing I can handle, and I kind of like the look of beadboard ceilings (in moderation) in older houses.
I’m also going to take out the big fluorescent light currently in the kitchen and replace it with recessed lighting.
Estimated cost for kitchen repairs: $500
Bathroom: Rip up the vinyl tile on the floor and replace with ceramic tile. The tub is in pretty good shape but the walls of the shower surround are plastic sheets of imitation tile, which look terrible. I’m going to rip all of that out, put in hardibacker (I’m guessing that it’s just regular sheetrock behind the panels, which will need to be replaced), and put in new ceramic tile on the tub surround.
The existing mirror/medicine cabinet is a tiny little original wood one, which is quaint and all but not so functional. Plan is to remove it, cover the hole with sheetrock and replace it with a new larger mirror (just a mirror, no medicine cabinet).
Then we come to the tricky part. I’m not sure how much money to put into the vanity area. It’s fairly new and in good shape as-is, but it’s a fairly cheap Home Depot special. There’s room for a double sink vanity, and it’d actually look a bit better, as the single sink vanity doesn’t really fill the recessed space it’s in, but it also doesn’t leave enough room on either empty side for a cabinet or storage rack.
Since it only has one bathroom, I’m pretty tempted to spend the money for a new vanity and double sink top. I can also salvage the existing vanity/top and use it in the future, recouping a little bit of the money at some point. It’s stretching a bit, and cutting against the grain of keeping things simple and cheap for this first flip, but if I’m going to spend money anywhere it should be here, to offset the fact that it’s only got 1 bathroom.
Estimated cost for bathroom repairs: $1,000
Roof, furnace, and water heater: This is where all of the monies are going to go. I’m probably looking at $5K or so, if I don’t replace the outside furnace unit, and more like $5,500 if I do. Boo.
The water heater is fine but needs a drain and pan installed.
Estimated cost for funace, roof, and water heater: $5,500
Painting walls, ceiling, and siding: The exterior is pretty much good to go, but I’ll likely paint all of the interior. More time consuming than expensive, but everything is currently painted a very pale yellow, which doesn’t do much for the eye.
Estimated painting cost: $300
Plumbing and electrical: Everything checked out during the inspection so hopefully this is all good to go.
Estimated cost: $0
Landscaping: This is a big one, but again, more time consuming than expensive. I’m going to put slate tile on the front porch and buld up limestone block beds around the entire house. I may put flagstone on the concrete walkway leading up to the house, but I’m saving this one for last, as it’ll depend on how much money I’ve spent. If the budget is struggling I’ll simply stain it and run a border of limestone blocks beside it.
I’ll sprinkle some new plants around the house and mulch all of the newly created flower beds. I’ll also likely build a simple flagstone patio in the back, set in stand with crushed granite as filler between the stones instead of grout. I’ll probably have to add some new sod here and there but I’m waiting to see how much of the grass comes back, now that spring has sprung.
I’ll also replace the metal wrought-iron on the front with two simple wooden columns.
I’m on the fence about adding a metal carport to the back. With the added costs for the furnace and roof thrown in, part of me thinks the carport is unnecessary, but it’d actually serve a dual purpose if I put it in, as it’d give some privacy to the patio area I’m planning (especially if I put up some latticework on one end of the carport, as the house is on a corner lot and the planned patio area would be close to a street. I’m going to add the cost in for now, but this may come out towards the end, like the flagstone front walkway, as I can simply do all of the other work and then make the final decision on whether to go with it or not.
Estimated cost for landscaping: $1,500
Flooring: The hardwood floors in most of the house are in great shape, thank Jebus. I’m going to rip up the carpet in the back two bedrooms and refinish the floors there, staining them to match the rest of the floors. I should be able to knock out all of the sanding in one day, as both bedrooms are fairly small, so equipment rental cost should be fairly low.
Ceramic tile for kitchen and bath are included in those sections.
Estimated cost for flooring: $300
Windows and doors: They’re all in good enough shape and short of some touch up painting and minor repair here and there, I don’t planon spending anything here.
Estimated cost for windows and doors: $0
Miscellanous: New switchplates and outlet covers for much of the house. I’ll have to replace some of the trim here and there, and will add crown molding in the living room, dining room, and kitchen. Plus other random costs for spackle, nails, screws, yada yada yada.
Estimated miscellaneous cost: $250
Total estimated cost for repairs: $9,350
Two months of mortgage payments plus insurance and utilities: $1,250
Ignoring fees and taxes and other expenses, that’d put my cost at around $70,600, for a house I orignally hoped to sell for $85,000. Which obviously isn’t going to make me wealthy, netting me a profit of $7,000-$8,000 when it was all said and done.
But that’s with me likely erring on the side of caution, pretty much everywhere, and absorbing all of the optional expenses mentioned above. That’s also a really conservative selling price, especially if I spend a little extra to nicen things up, since my original plan was to do the bare minimum of work necessary and sell it fast.
I’ve been watching the local MLS listings on a daily basis for the last six months or so, and am pretty confident that listing at $89,500 and accepting as low as $85,000 would move it really quickly. With all the planned improvements, though, listing at something like $94,500 is a lot more feasible, and it’s not outside the realm of possibility that I’d get a buyer at that price. Since I can’t sell before 3 months have passed due to my mortgage, I have a little more room to initially list it on the higher side, and adjust it down accordingly if I’m getting close to having to make a third mortgage payment.
So that’s pretty much the very rough plan, in a nutshell. I hope to have all the repairs done by April 15th, and the house re-listed and on the market. Preliminary budget is $9,350 for repairs, but with some optional items included. Original listing price will be at $94,500, hopefully selling the house at $90,000. Net profit after all fees and taxes would be somewhere in the $10,000-$12,000 range.
Or, you know, something like that.
Comments
2 Comments so far
What about closing costs? I don’t see those included anywhere. You’ve only mentioned two months rent; what if it takes a few months to sell it? Those two items together might eat $5k+. That leaves a fairly small amount of breathing room for underestimated expenses…
Aaron,
Those costs actually are included (vaguely), as in the first scenario if my costs are roughly $70,000 and I sell for $85,000, that’s a gross profit of about $15,000. Since I’m not 100% sure what those costs will be, I assumed $7-8K, which produced the net profit of $7-8K.
As far as it taking more than a few months to sell, sure, that’s always a possibility with real estate. Kind of hard to account for that, though, until it happens. I can’t really see anyway to avoid that, if it happens, but yeah, each extra month I make a mortgage payment definitely cuts into the net profit.