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Friday, October 12, 2012

House #10 Update and Rehab Budget Recap

The rehab on House #10 is complete and the house went on the market at the end of September. I am very happy to announce that we got an offer on it 72 hours after we put it on the market. Although it was not a full price offer like we got back on House #9 after a short round of counter offers we got to a price we could both live with and now the house is under contract!!

Probably the one thing that I liked about the offer more than anything was the fact that the buyer was using a conventional loan and they were already pre-qualified which is not the same as pre-approved.

So what? You might ask…




This makes a big difference. First off, a conventional loan does not have the same requirements as an FHA loan, which is the type of loan almost every buyer for my houses has used. This means we don’t have to worry about the FHA 90 day rule, where if the house has been owned for less than 90 days it requires another appraisal and inspection plus some lenders will flat out not do a loan on properties owned less than 90 days. 

Second, the fact that they are pre-approved means the lender already checked their income, credit, tax returns, etc. and the buyer has a much higher probability of being approved for the loan.

They have done their inspection on the house and asked for a few miscellaneous repairs. They want me to seal some vents in the roof, replace a rotted piece of trim outside (which I missed during repairs) and change the electrical box on the AC condenser outside because it’s rusted. These repairs should be fairly simple to make and I agreed to do them.

The appraisal has also been done. Since there are some good comparable sales nearby and the house is in such good shape the appraiser told me he felt the house should appraise fine. I, of course, met the appraiser at the house like I always do and provided him with a list of repairs, comps and a copy of the contract.

Since I have not heard anything back from the buyers agent or lender on the appraisal I have to assume the appraisal went fine otherwise I would have heard about it already. Nevertheless you know what happens when you assume...so I will check with the lender.


Rehab Budget Recap


Now that everyone has been paid and all the returns have been made I got around to calculating my rehab totals. Drumroll please … 

It looks like my total cost for the rehab work is $34,700. You can look at the budget for this house so you can see item-by-item detail. You will notice that I had projected a rehab cost of $32,549.

Here is a recap of the items that put me over budget (as best as I can tell):

  • One of the AC units in the house decided to quit on me after 2 weeks of working fine. The problem was the coil in the furnace so I opted to put in a new coil. That set me back $1,000. 
  • I also ended up paying about $700 more than I estimated on cabinetry since the bathroom vanities on this house were an odd size and they had to be special ordered. 
  • Had to replace the pressure regulator valve to the house since we discovered a leak in it after the rehab was done. 
  • I underestimated the cost of all the tile work we did. Not only labor but materials also because we opted for expensive granite tile for the fireplace. However the results were well worth it. 
So overall, after the buyer requested repairs are done, I will be about $3,000 over budget. This does not make my obsessive-compulsive nature very happy but considering how quickly we got the house under contract and the profit we are projecting I can live with this.

We are scheduled to close by the end of October so knock on wood we will take this to the closing table in a couple of weeks! 

Question: Do you think it was smart to take the first offer we got or should we have waited a bit more?


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4 comments:

  1. I'm just stumbling across your site... and it looks like good and helpful information... Unfortunately, it's almost unreadable on my iPhone thanks to the floating "Share" panel on the left side that covers up part of the text. It's especially bad in the mobile version of the site.

    Just letting you know, as I assume you'd like your blog to be readable by as many as possible! :)

    ReplyDelete
    Replies
    1. Thanks a lot Rich. I checked it in my phone and you are right, I did not know it did that. I will now have to figure out how to fix it...

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  2. hi mr. Luis,can you explain to me how do you make a decision on a fiberglass tub surround or just tiling the tub surround

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  3. Kareem, that is basically a function of the price range of the house and the budget. Of course a tiled surround is always a nicer looking choice. But in a lower priced home you can get away with doing a fiberglass surround which is a lot lower cost than the tiled.

    On this house a fiberglass surround would have been a downgrade almost. At this price range a tiled surround is a must. Back in House #9 I would have done a tiled surround in both showers if my budget would have allowed but I didn't have the money so I did a tiled surround in the master shower and a fiberglass surround in the secondary bath.

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