Flip Thy House

Let the Games Begin

No huge surprises in the first real week of work on House #3, as I finished most of the demo work over the last few days, building permits have been secured, and the plumbing and electrical bids have been finalized. Wonder of all wonders, the plumber is actually ahead of schedule, which is something I never thought I’d find myself typing.

I was pretty happy with both the plumbing and electrical bids, as they came in at $2,000 for the electrical (which includes installing all fixtures, ceiling fans, and outlets) and $1,800 for the plumbing. It’s a very small, simple house, so I was estimating $2,000 for each job, but that involved a bit of guesstimation based on past jobs, so it was nice to get those nailed down at about what I’d budgeted for them.

No major surprises after demoing out the rest of the interior, other than more ridiculously shoddy work. It was kind of frustrating as almost all the demo work was undoing the recent feeble attempts at renovation, with the net result being a lot of dirty grunt labor and wasting of sheetrock, as we had to open all of the walls anyway for electrical work and getting inspections approved.

It always baffles me that people will be so half-assed with work, as far as taking the time to frame and stud out walls, add new electrical boxes, and sheetrock it all, but not replacing 60 year old electrical wire, or using super-cheap 1/2″ sheets of insulation in the walls you’re sheetrocking over, instead of spending a few extra bucks for decent insulation. I mean, I get why people do half-assed work, so I could totally understand someone leaving old electrical boxes in place, not adding any insulation, etc., and calling it good, but it’s baffling to do 90% of the work somewhat correctly, using a good deal of effort, but half-assing the remaining 10%, necessitating ripping it all out.

My favorite “renovation” was where the guy added a new round ceiling electrical box for a light fixture in the living room, but didn’t have a stud in the ceiling to nail the box to, at the place where he wanted the electrical box at. Instead of using blocking or something similar to give himself something to nail the box to (which he obviously knew how to do, as he did it elsewhere), in this case he just decided to create a huge, basketball-sized mass of spray-in foam, which when hardened bridged the gap to the stud about nine inches away, and sort of held the ceiling box in place and in position. Quality craftmanship, that.

On the annoying and/or frustrating side, the city wants us to add parking space for two cars (a 9′ by 18′ space for each), as that’s apparently required since I’m adding a bedroom to make it a 2-1. It also has to be asphalt or cement. Very much overkill in this case, as the house small, is on a dead-end street, and is the only occupied house on that side of the street. There’s a dirt/gravel driveway to the side of the house that people have obviously used as a driveway in the past, but it’s unclear how much of it straddles the vacant lot next door, so I’m likely going to need to have a survey done, especially if we have to pour a concrete drive. Which isn’t the worst thing in the world, as I’d thought about having it done anyway, but I hadn’t planned on the added expense of providing paved parking for two cars.

All in all, very happy with progress so far, as I didn’t expect to really get rolling until January on this project, so we’re getting off to a good start and already a bit ahead of the game.

House #3 = Closed

Everything went off without a hitch yesterday as far as closing on House #3, so it’s officially mine now, and the fun can begin in earnest. And yeah, I know, I need to come up with a more creative naming system than “House #1. House #2, House #3″. Maybe I should wait a bit until House #3 is more presentable, as if I tagged with a nickname now it’d be along the lines of “The Tiny Little Crappy Boarded-Up Abandoned House”.

As a reminder, here’s the beaut of the house I just bought (and the obvious tilt in the first photo is camera pilot error, as the house and foundation are surprisingly level):

It was fairly amusing talking to the seller, as she’s a realtor based out of Austin, and kind of a piece of work, as she seems to mainly buy houses to flip herself, in all sorts of cracked-out neighborhoods in and around Austin.

She did have a lot of useful info about House #3 in general and the status of the abandoned houses to either side of House #3, as her handyman who’d been trying to fix up House #3 talked to the neighbors a good bit. It’s sounding more hopeless as far as trying to buy the adjacent abandoned pink house right next to House #3, as it’s involved in various suits and liens, and the estate that owns it consists of like ten million kids, half of which are in jail, and it’s apparently been sold once at the tax deed sale but that was rescinded as all of the estate wasn’t properly notified, etc.

I think I’m going to try to start the process of simply getting it condemned and torn down by the city, as they’re apparently good at acting on such matters and it should be an easy enough case to make, as there’s not much left of the house, people have obviously been hanging out there and getting high in the not too distant past, there’s a church and an elementary school less than three blocks away, yada yada yada. Just having the eyesore next door gone would probably improve our property value by $5K, so it’s more than worth jumping through all of the necessary hoops.

The seller also had heard that the guy who owns the empty lot on the other side and the other abandoned house on our side of the street apparently wants $30,000 for both, which is, how shall we say, wildly optimistic. The house was apparently built by midgets, as it has 6 foot ceilings throughout, and is half-collapsed as it is, so the only real value is in the two lots, which are reasonably worth something like $8k-$10K. I sent the owner a letter a few weeks back, offering to buy them, but never heard back. He’s a couple of years behind in taxes, though, so that’s one to definitely keep an eye on, as far as potentially picking it up at the tax deed sale.

Our contractor is already at work on House #3, which is a welcome change from projects past. While I might be half-crazy for tackling House #3, it’s a world away from where I was last year at this time, in the midst of trying to get House #2 done. While the House #2 saga ultimately ended well, I’m pretty thankful to not be entangled in a similar project this time around, as far as sinking a ton of money into a house that I’m praying I’ll be able to sell, (and one that’d only marginally break if I had to rent it), working with a contractor that I trusted about as far as I could throw him, etc.

‘Tis a much different story this time around, which I’m very thankful for. Not that House #3 won’t have the inevitable bumps and snags, and I’m sure I’ll be sick of it by the time we’re finished with it, but it’s nice to have a solid game plan going in, to the point that I’m already looking for the next project, instead of hoping and praying the current one works out.

All Systems Go for House #3

We’re still set to close Dec. 22nd on House #3, with very few hiccups so far. Amazing how deals seem to go oh so much more smoothly when it’s a cash deal and no mortgage lenders or loan agents or underwriters are involved. Now if I could just find a way to eliminate plumbers from the equation as well, we’d have a massiviely efficient, well-oiled machine…

Despite my best efforts, I ended up going with our current agent at Allstate for the builders risk insurance policy on House #3. It’s a weird situation, as our agent is based in Austin and I have only good things to say about him, but he’s no longer just down the street now that we live out in the sticks, so I was hoping to shift new insurance stuff to a local agent. Tried two different insurance agencies, one couldn’t figure out how to return a phone call and the other seemed a go, getting me a quote on a builders risk policy and seemingly ready to roll, only to suddenly back out when I wasn’t willing to shift all of my existing insurance policies to them.

So it was back to our current insurance agent, who again, is very awesome, cool, and a pleasure to work with. The problem, though, is his secretary is like 90 years old, and she ALWAYS (and I mean ALWAYS) nearly causes doom to rain down on my head. Unintentionally, to be fair, but something ALWAYS goes wrong when I’m setting up or cancelling a policy I no longer need. No matter how clearly I explain it and create diagrams and hire planes trailing banners to tell her exactly what needs to be done, the exact opposite always almost happens.

 If I’ve sold a property and no longer need insurance on it, the policy that nearly gets cancelled is the coverage on our primary residence, even after pointedly asking her nineteen times to make sure she understood what we needed or didn’t. And so on. This time around she asked me if the agent had done a builder’s risk for me before, and I said yes, that the last house I renovated and sold (House #2) was done with a builders risk policy.

She then took it upon herself to make the leap that I was somehow talking about our current rental property (House #1) instead, and started to cancel coverage on it, working on the logic (I’m guessing) that people just have one house, so if I mentioned recently selling a house (and it was’t the one I live in), it must be the rental policy that was on our account, which I surely didn’t need anymore, having sold the house.

Face palm.

But we finally got everything sorted out, and are good to go. The policy itself was a bit more expensive than I’d hoped ($400 for 6 months of coverage) but the deductible is lower than some other policies at $250. One concern with this project is the less-than-spectacular neighborhood and the fact that it’s located in what’s essentially a cul-de-sac with only one entrance, so it’s secluded, with a wooded creek area running behind the property.  Builders risk policies work well for situations like that where you might have break-ins or materials walking off overnight, and obviously the lower the deductible the better, if you’re talking about the possibility of filing smaller claims for non-catastrophic losses caused by break-ins, etc.

My contractor is pretty much ready to roll, and plans on getting started as soon as we close, which was good news. With the holidays I didn’t expect much to happen until January, but he said he’d just hired two new guys on his crew and that they’d all prefer to work and make money, except for Christmas day, and that’s more than fine with me.

We’re still going back and forth with budgets and timelines, but the goal is still to be done by January 31st and hopefully have the place rented. Current budget is at $17,500 for all repairs, and I think I can hold that line pretty strongly without the inevitable creeping budget overages.

Things I’m Thankful for: Hidden Hardwood Floors

I got a little antsy this morning and snuck over to House #3, as I wanted to measure dimensions of various walls and windows, and investigate the possible salvageable hardwood floors in the existing bedroom.

That involved shifting all of the crap out of the bedroom, which turned into a bit of a treasure hunting expedition. Well, treasure in a very relative sense. There was some unused sheetrock leaning against one wall which I obviously knew about, but not the fifty pounds or so of brand new finish nails, or literally 50 new tubes of caulk in the closet. The old original wooden front door from the 1930s was also hidden back there, which I could get a couple hundred bucks for at a local architectural salvage place (although I’ll probably just keep it for future use somewhere).

I finally got everything out of the bedroom and prepared to do battle with the old linoleum on the floor, assuming it’d be difficult to remove. Umm, not so much, as it was basically just lying loose on the floor except at the edges, and even those spots pulled up easily. It took me all of ninety seconds to get the old linoleum up and uncover what was underneath.

So aye, the pine floors in the bedroom are more than salvageable, as they turned out to be in pretty good shape. (And yeah, hush, I know I’m not supposed to be over there pulling up flooring before I buy it but given the shape of the house and condition of the old linoleum, it was going to be pulled up by someone, at some point.)

Since those floors are only in the bedroom, I’m leaning towards keeping that room the same dimensions in my new floorplan, and working with what’s there. Here’s the current floorplan I’m leaning towards, courtesy of the cool free tool at floorplanner.com:

Pretty straightforward, as we’re talking about a shell of a 504 sq. ft. house, with only the bedroom currently framed in. I waffled on the addition on the back, as it obviously complicates things and bloats the budget, but the more I think about the more I think it’s a good idea. It’ll get the square footage up to about 625 sq. ft. and let me market it as a 2-1 (albeit a slightly odd second bedroom, as those are French doors leading to it, so not your standard bedroom).

Really simple and basic, though, all the way around. Some things definitely aren’t optimal (walking in the front door and immediately greeted by a wall and bedroom to your left, the wasted space in the corner right outside the bathroom, etc.) but it ain’t the Taj Mahal. And doesn’t have to be, as I’m just shooting for a basic little functional house.

Still working on numbers, but it’s looking feasible as far as repair costs of about $17,500, which would put me at about $28,000 as far as total costs in it (including closing costs and all that fun stuff). With the ridiculously low property taxes (the property is appraised at just under $5,000 by the county), it should cash flow about $250/month, if I can rent it for $450/month. That should be pretty much a slam dunk (even with the less than desirable neighborhood), as you can barely rent a 1 bedroom apartment here for that, much less a 2-1 house.

Which isn’t bad at all, and what’s got my interest more than a little piqued about this project and others like it. This isn’t the sort of rehab a lot of investors would touch as there’s not a huge amount of upside potential as far as resale value, but man, these things can cash flow nicely if you can find structurally decent run down or abandoned properties like this, appraised by the county for almost nothing. Property taxes (in Texas at least) can be a silent killer when it comes to rentals, especially with new construction, but you can dodge a lot of that if you’re working on a very old, unloved house like House #3.

Am I Really Buying Another House?

I’d be lying if I didn’t have a few moments yesterday morning while leisurely drinking my morning coffee, poking around on the Intrawebs, reading more terrible economic news, when I questioned why exactly I was buying a tiny little abandoned house in not the best neighborhood in town. I mean, I enjoy this real estate stuff, true, but I also enjoy playing Fallout 3 on my Xbox, and one of those two things is immensely less risky, expensive, and time-consuming.

But the moment passed, and I got busy working on floor plans and seeing if I could get our contractor out there. Met him later in the day and he and his helper kicked the tires with me, tossing around different ideas.

Some of the good news, in no particular order:

1) He didn’t think I was batshit crazy for buying the house. We’ll need to undo most of the “repairs” the guy living in it did while he was supposed to be fixing it up, but the bones of the house are solid are far as the foundation, beams, subfloor, etc.

2) He thinks we can salvage the old metal roof and just redo the flashing and some of the ridge caps, paint it, and call it good. It’s currently doing it’s job and water-tight, it’s just not much to look at.

3) Wonder of all wonders, there are fairly nice original hardwood floors underneath a couple of layers of old Masonite and linoleum floors. Some areas aren’t salvageable but I think I can save the hardwoods in what will be the main living area and the bedroom, and put tile down in the bathroom and kitchen where the floors are beyond saving.

And the bad news:

1) The biggest problem with this property isn’t going to be the house itself, but the abandoned house next door. This thing is a real piece of work, as it’s an original house built in 1910 with another structure tacked onto it (literally) as some point. The realtor selling my property said at one point 12 people were living next door, until some of them were arrested, kids hauled off by protective services, and the whole gypsy camp shut down.

Poking around yesterday, the abandoned house next door is obviously where the cool kids hang out. To smoke crack. The house itself seems to be securely boarded up, so there’s no one squatting in it, but there’s trash everywhere outside, including a ratty old couch beside the house with like nine million empty lighters and beer cans scattered around. One nice thing about my property is that it’s very close to downtown but kind of secluded, on a dead-end little street with a park next to it. But seclusion cuts both ways, as evidenced by the activities next door.

The real problem is that the property belongs to an estate, which only lists the property itself as a mailing address. Even better is the fact that they haven’t paid any taxes since 1983, so they owe nearly $7,000 in back taxes and fees. Complicating things is the house sits on the only irregular lot on the street, which extends down and then behind the other lots like mine, so it’s actually on a 1 acre lot. 50% of which is in a flood plain.

So yeah. Messy. Buying it from the estate would likely be problematic even if I could contact them, as dealing with estates are usually nightmares (especially given the nature of the family that had been living there previously), and they’d likely have unrealistic expectations about the property, given the lot size. And anything paid to them would be on top of the back taxes due.

The realtor selling our property thought that this one was going to the tax deed sale soon, which might be the only way to go. $7,000 would be a decent price for it, as one of the structures on it looks salvageable. The only problem would be the 6 month redemption period the previous owners would have, as I don’t believe I could legally demo anything during that period.

A completely illegal option (which I may do) would be to simply clean up all of the trash outside it, including the party-time couch and other similar crap. Technically speaking, I’d be trespassing and stealing, but I highly doubt the only neighbor in sight would mind. He’d probably pitch in and help, as he actually maintains his house and yard very nicely.

I’ll also probably bite the bullet and put up a privacy fence, to at least give my future tenants some relief from the eyesore next door. It’s something I’d do farther down the road, when trying to sell the property, so it’s not a waste, just an expense at this stage I’d rather avoid. It’d mean that I’d also have to pay for a survey, as it didn’t come with one and I have no clue where the actual property lines are (other than the general plat info) which again is useful down the road but not needed at this stage.

2) The sheetrock and electrical work already done needs to just be ripped out. Not a huge loss as only 1/3rd of the house had been sheetrocked, but I’d been hoping we could use it just to save some time, more than anything.

All in all, pretty excited to tackle this one and get to work. It’s a little frustrating to wait until closing on December 19th, but that gives me some time to get a floor plan squared away, and hopefully a
more set schedule with our contractor, as far as deadlines for various stages of completion, incentives to finish early, etc. Especially since I’ll be tackling some work myself, so being better organized will help me stay out of their way and not be stuck waiting for them to finish this or that before I can paint or tile.