So, me and my husband watched a few Netflix fixer-upper shows and were motivated that this is awesome way to make side income. Afterall, My husband had been a very good handyman at home and I was proud of the way he had gone about addressing small and big fixes. We thought- we are ready to buy our first fixer upper. So we started looking for our first investment home. It was suggested to us that the most of the investment deals require cash closing since it’s more than likely a multiple-offer scenario. We had 150 k in savings and we started looking for anything under 150k and yes, we did found something in about a months time we were so excited. The numbers looked
something like this.
Purchase Price: 120k
Rehab & Closing costs : 30k
Resale Value (After Rehab) 175k
Wow, if all goes well we could be making close to 25K…that’s how much we save after 3 months of both of us working fulltime this is pure magic. We were so excited. Unaware of the challenges which lied ahead.
- Challenge #1 : Scope of work not very well defined. Once the contractor started working on the job, several small things started adding up which weren’t his scope of work and we weren’t aware of shower door installation costed me $1200, granite installation costed me $1200, landscaping costed me $1200, electrical panel upgrade costed me $2000 and many more small and big things combined some of which were our lack of expertise in defining scope and some as discovered after work started our total rehab cost ended up being 50k - 20K over budget. We were definitely cutting it very close.
- Challenge #2 : Does the shade of laminate flooring in the living room match with the tile in the kitchen does the backsplash in the kitchen match with the tile in kitchen and with the granite countertop. How would it look all together when done. Make sure to spend enough time in reviewing the color choices: paint, flooring, countertops and use websites like Pinterest and houzz to get some ideas. The trends keep changing and it’s important to stay in sync. Remember “Grey can be the new biege” or “maybe not”.
- Challenge #3 : Turning the gas on you would think that it’s straight forward. So we call the utility company to turn the gas on…and we were told that since the gas had been off for more than 6 months. You need a full inspection by a licensed plumber who can pull permits and perform a pressure test. Oh wow. Yes that’s what our expression looked like. So we carried on with the inspections, found some pressure drop issues, some more repairs and $1500 later..we were ready again.
- Challenge #4 : Don’t forget to adjust the net profit you make with sweat factor. Sweat factor is defined as the amount of time you spent in a project multiplied by your hourly rate say at work. This helps you figure out. If the effort is really worth it??
So, all said and done. We made 8K profit from an initially planned 25K still not bad but still only 32% of originally planned. I’m sure future projects will bring more exciting challenges but we will be better planners too.