When confronted by the unexpected, simply change gears, and you can still come out ahead.
Editors Note: The following is a case study of one rehab deal, courtesy of John Tesh, who with his wife, Corinne, owns Citygate Home LLC in Greensboro, N.C.
We found this house by a referral from a past customer. She knew we paid cash for houses and closed quickly. The owner was in trouble and getting ready to go into foreclosure. It didn’t fit our normal house-buying model, but we knew we needed to help her.
We put together a deal that worked for both of us. We were able to help catch her payments up, close on her house, plus pay for her move and six months of storage for her stuff.
This house is in a smoking-hot neighborhood called Lindley Park in Greensboro, N.C. The houses there were built in the ‘30s and ‘40s and feature mature trees and large yards and are minutes from shopping and downtown.
Initially, we were going to keep the original kitchen and bathroom as is. We were going to do what HomeVestors calls a “whole-tail,” a wholesale-retail deal. We planned on selling it on the MLS for around $159,000, just doing the roof and cleaning up the yard, updating the HVAC and letting the new owners paint the outside and inside.
As with most rehabs, we ran into some issues our initial inspections didn’t reveal. We found an old, unused but still connected hot water tank hidden inside the kitchen cabinets that had been leaking. We had to tear out the cabinets and rip up the floor down to the joints. This forced us to change our exit strategy, so we totally changed gears and did a full rehab. We actually added a second bathroom, and that allowed us to maximize our return on investment. So the house was listed as a three-bedroom, one-bath. It’s now a three-bedroom, two-bath.
It really could be a four-bedroom, two-bath. There was an addition built on the back in the ‘80s. That is the flat-roof part where it joins the back deck. Someone could turn that into a huge master suite, and that is where we added the second bathroom.
Most of the floors in the house were hardwoods, and they were in really good shape. We were not even going to do those, and in the end, when we had to switch gears, we called our hardwood floor guy. He had an opening coming up two weeks later, so we said, “Yes, put us in the slot,” so we did the hardwood floors.
Out back, the existing deck structure was fine, but the wood was rotted, so we ripped off the top boards and re-decked it. That small outlay of money has made a huge difference to the property.
My wife is an interior designer, and she runs the projects as well as the office. I am the buyer, and I’m out looking at two or three houses a day. Corinne’s job is to coordinate the scope of work and handle all the trades, color palette and finishes. We pull the building permit as the owner of the property, but we have all the trades pull their own individual permits and get inspections. We get everything inspected because, in today’s market, in a flip like this, the Realtors and owners want to know everything has been done correctly. We bought the house for $121,000 and spent $38,000 in repairs, and it’s going on the market for $225,000.
My wife has her strengths. I have mine. We make a great team. She has her broker’s license, too. The only reason she has it is because before we joined HomeVestors we were burning out Realtors with 20 or 30 offers a month on foreclosed properties where we just couldn’t make the numbers work. We were relying on their conservative comps, and we missed out on lots of deals. So now that we’re with HomeVestors, we have fantastic advertising and incredible systems to guide us.
My background as a photographer allows me to have some creative fun as well as promoting our projects on social media. By posting photos of our daily progress on Facebook, we have built a huge audience. At the end, I create a video or two to tell the story, and we typically have over 100 visitors at our open houses. And often, a bidding war ensues. I love this business! •