Flip This House - Number Two

Parent Cafe
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<p>We are now done with Day 2. This has been a whirlwind. I’ve had six different specialists in to give estimates for refinishing floors, new roof on garage, electrician, heating/AC, paint restoration, window restoration, etc. Plus every neighbor wants to come over and see what happened to the prior owner and welcome me to the neighborhood.</p>

<p>Unfortunately all of these guys want instant decisions on where everything is going to go and I am just not there yet.</p>

<p>What we have accomplished in 2 days (absolutely amazing)</p>

<p>Full demolition of bathroom
Full demolition of kitchen
Removal of all doors and everything we are trying to save. Trying to store them in a bedroom so the gorillas don’t ruin things while hauling stuff and doing demolition</p>

<p>Masking off of all wood built ins and wood floors
Removal of bathroom floor
Full stripping of all cast iron sewer and drain lines from under the house
Removal of all bars that were bolted over the windows (prior owner paranoid)
Removal of all lighting - some will be saved and taken to the Architectural Salvage store (just not my taste, but I know they are precious to many other people)
Removal of plaster on all bathroom walls
Removal of plaster on 2 kitchen walls
Removal of all outlet and switches in house (wiring still sticking out of the holes)</p>

<p>Installation of new electric sub panel in garage
Wiring of garage, new outlets, switches and new ceiling lights
Installation of special work outlets in house for tools</p>

<p>I have loaded more pictures of our demolition. I’ve added detailed descriptions on the photos to help</p>

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<p>o.k., I saw pictures before…but now I need to join group…help!</p>

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<p>Uh Oh… did I lock the group?? I’ll go back in and unlock the group. I was just trying to lock the ‘Photostream’ of pictures that I use to load the group. I’ll fix it</p>

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<p>I just checked again. It shows that the photos are available for public. Let me know if you are still having problems</p>

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<p>CB, first chance I’ve had to read this (new) thread after going along for the ride on your first thread. Just want to say thank you so much for sharing your experience with us. I love hearing your step-by-step progress. Best of luck…can’t wait to hear what was discovered during demolition. Hope everything goes as smoothly as possible.</p>

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<p>I had to sign in with my Yahoo ID to join the group and see the photos, even though I could see them before. So it might look as if you have an additional group member this AM.</p>

<p>Anyway – love the photos, love your rapid progress! Remember that time is money, so make those decisions quickly!! </p>

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<p>OK, I think I changed it back to ‘anyone’ can see the photos. Hope that works.</p>

<p>I should have some time tonight to give a full update on what we are finding under the covers at this house.</p>

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<p>just let you know that the flicker still need a log in, since I had a Yahoo account, it is not a problem.</p>

<p>did you take down the fire place? or the entire interior walls? The wires look ok, was rest of it knobs and tubes?</p>

<p>I am in the last stage of bidding out a REO house in a lessor area. It is cheap, but I should be able to make more than 20% on the money. You just cannot find any real “deals” in the Bay area any more. With CB’s tip, I am using the listing broker as selling broker in hope I can gain some advantages in the bidding. There is no such thing to buy any house in MLS without bidding. At least, for this one, I can have my time to crawl the crawl space to inspect with a contractor. In addition, it is vacant. Now a days, the price is so high that in a foreclosure sale costing more than this deal and you have to buy sight unseen.</p>

<p>This house I am bidding is probably red tagged as the water and electric has been turned off. In addition, the electric meter is “stolen” by the prior owner and the breaker box is a mess. I think PG&E has disconnected the power, to restore it will be a bear.</p>

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<p>Just a reminder that I am sure you already know …if house is red tagged and services turned off you will need full permits with inspections. Probably licensed contractors for your protection also. Adds some cost</p>

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<p>Yes, I learned my lesson from previous project. We were on generators for a month, PGE won’t turn on the electric until the permit was final. For this one, the electric was turned off in the first place and there won;t be any until final.</p>

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<p>I’m sure you can find some Arts&Crafts-ish style lighting fixtures that will go well with the house. </p>

<p>The fireplace is great. You have to keep it, faded or not! Also a must: keep that swinging kitchen door! I’d like to have one installed here, if we can ever afford to redo the kitchen. </p>

<p>I wish I could show you pictures of the hardware, stained glass, solid oak doors and so forth in my house…</p>

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<p>I called PGE and as expected, to turn the electric back on needs a permit that is final. It surely will add more cost to the construction and insurance is going to be a problem.</p>

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<p>In search of comparables for my deal here is one of the flipping story based on MLS info</p>

<p>This REO 2bd/1ba house was listed in 2010 for 115K and in 106 days they could not sell it, so it went to auction and was sold for 86K. Three months later, the house was listed as remodeled house with 36" commercial stove and all the trimmings for 210K and could not sell and the listing was canceled in 19 days. The flipper most likely rented it out and in 6/2013 it was sold for $279K in 9 days and I have to pay $180K today to win a similar home in the same block that needs everything. I don’t know if I want to spend 40K in it to get that 280k. Net margin is only 40K at the best.</p>

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<p>In my world down here people would jump all over a profit of $40k on a $180k investment. That is a huge profit based on percentage of original purchase.</p>

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<p>I got stuck with some expensive insurance on this property. I am using Attain and it is about $150/month insuring $250,000 value of building. This is because I revealed that the house is fully under construction. Some of the other insurance companies will not underwrite a policy for me because I do not have a licensed general contractor doing the work or because I don’t have a contractor license. Lloyds of London policy runs about the same.</p>

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<p>Also, that has $2 million liability included in the coverage.</p>

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<p>$150/month doesn’t sound that expensive to me… how much would it normally be?</p>

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<p>right now I am paying cheap insurance for my other house around 700/year
I have another rental which is about 1500/year</p>

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<p>Trying to get property insurance in this business is difficult and expensive. Most companies will not cover a ‘vacant’ house. When I tried to explain that my lead worker lives in the house they insisted on a copy of the ‘lease’ agreement. That reduces the number of companies available. After that, some companies will not insure if you don’t have a licensed contractor doing work on your ‘vacant’ house. </p>

<p>California Fair Plan is the least expensive insurance for a flip but it does not cover ‘vandalism’ or include liability. Also, I’ve discovered that if you are working through an insurance agent they will never mention California Fair Plan. When I insisted that I wanted California Fair Plan (because I am not worried about vandalism) they keep giving me the run around about how California Fair Plan is ‘backlogged’. In other words… I don’t think they get a good commission.</p>

<p>Lloyds of London and Attain are the others that will cover with liability</p>

<p>Be careful about what portion of the annual premium is pro-ratable. Obviously I am not keeping the house past say 3-6 months. Both Lloyds and Attain retain a portion as non refundable which actually makes the monthly cost a little higher than I noted, depending on how long you keep the property.</p>

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<p>Week One Recap:</p>

<p>Purchased the house on Tuesday
Started demolition at 9am on Wednesday - Dumpster arrived at 12:30pm</p>

<p>I recapped everything we completed up through Day 2. Here’s what we accomplished on Day 3:</p>

<p>New ABS sewer line from front yard through house to bathroom. Drain lines completed for sink, shower, toilet.</p>

<p>My guy is going really fast because he knows how upset I get when there is not a toilet. There is no way we can put a Porta Potty at this project. It would have to be on the little front yard, not a good idea for the neighbors:) </p>

<p>Today I had to go to Home Depot or the local hardware store SIX times!!! A new world record. I bought $500 worth of black ABS stuff at 7am this morning, multiples of everything so we wouldn’t get stuck at some point. Well, by 8:30am he’s telling me he needs 4" ABS something and I need to rush back and get it. And on and on and on. </p>

<p>We scraped up the layers of flooring off the kitchen floor and there was definitely an original layer or two with asbestos in the linoleum. And, it all smelled awful. The wood sub floor needs to breath but it is in good condition.</p>

<p>Scrubbed the wood floors and laid down paper protection on all the floors.</p>

<p>THE BAD:
The listing agent that sold this property paid for a professional home inspection with full inspection report. She shared that report with me when I was making my decisions on offer price. I thought I knew what needed to be done in this house. Well, I’m guessing that guy was blind when he crawled under the house because there is NO mention of crumbling cast iron sewer and drain lines. </p>

<p>While pulling up the flooring in the bathroom we discovered that there was 2-3" of solid concrete at the bottom. This was covered with the original mosaic tile floor (which was beautiful but ruined by the time we dug it out). Then there was mortar and a new layer of ceramic tile (not beautiful). The total weight on the subfloor was 4" deep of tile, concrete and mortar. There is actually a 4" difference from the subfloor in the bathroom and the adjoining wood hallway. I just cannot figure out what was going on here.</p>

<p>After this is all pulled out (you can see pictures of the concrete and tile in the photo album) found that the subfloor was rotten and termite ridden. That’s to be expected so we pulled it all out. But what I didn’t expect was that the cast iron large sewer line under the floor was completely disintegrated, cracked and had holes. The holes were on top of the pipe. So, if you flushed the toilet you could just watch everything going down the pipe - poop flow! Miraculously, it wasn’t cracked or open on the bottom part of the pipe which is why I did not detect sewer smell or moisture when I poked under the house during my initial inspection. Really weird. </p>

<p>Well, that meant that the toilet had to immediately be pulled out and all cast iron under the house had to be pulled out. I was under the fantasy that we were going to be able to have a makeshift toilet for awhile - NOT! So, we are getting creative regarding restrooms again. My strategy is that I hand each guy $2 to go down to Jack in the Box to buy a Coke and use the toilet. Hey, it’s cheaper than renting the Porta Potty/sauna!</p>

<p>This was not in my estimate at all. Day 3 and I’m already going to be way over on the plumbing budget - Again :)</p>