Over the past few months, many people have been asking me about the rehabs we have been doing, and countless times i have been approached by someone who has asked, "Hey, can i tag along with you for one day to see what you do each day?"(kinda flattering actually). So although i have granted this to some, i cant always do it and cant do it for everyone as my time is VERY scarse and limited. For that reason, I have actually started our first Rehab Mentorship program where I walk everyone through a current project of ours for experience and while in our mentorship, our group WILL take down a LIVE rehab project of our own where EVERYONE WILL make money with us as they learn, GUARANTEED...no BS theory, no books (yet), no tapes (ok...no CD's), but rather Hands-On, Smack You in The Face, Real World, I Am Telling You The Way It Is so Toughen Up, Nothing Will Stand in My Way, The Days of Buying Course After Course Are DONE kinda ACTION.
With that, I have decided that its time to share, give back and allow anyone who gives a...(HEY! you finished that saying Mr/Mrs Potty-Mouth, not me) an opportunity to follow this rehab as it is happening from start to finish from someone local actually doing it versus someone 1,500 miles away where we really never know whats happening and dont have the opportunity to see progress.
SO....today is Day 1 of the 97 Oraton Street Rehab located in the North Ward of Newark. This is a detached 3 story, 3 family building and the unit mix is a 3/3/2, and the story starts out like this:
Once upon a time in a land far far away (Newark is actually only a 35 minute drive from home for me, but if i walked there it would be far far away, so lets roll with that), there was a young boy (me) and his friends (business partners) who embarked on an adventure to become the biggest and baddest (I' kinda big @ 6'1" and we are all actually very nice and approachable) providers of a special magic potion that couldnt be found anywhere in the kingdom (I am talking about sit back and stuff your pockets with CASH FLOWING, guaranteed rents for a year, management and maintenance free, renovated 3 unit and up multi family properties)...OK, A.D.D. is setting in now, so lets just jump into the meat and potatoes.
As on all of our rehabs, our business philosophy is to be geared towards being Section 8 compliant. This way, our end Investor will know IF they decide they want a Section 8 tenant that they will pass a Section 8 inspection. Section 8 has a much more stringent inspection process then the typical town inspection, thus there are many landlords that do not accept Section 8 applicants because they know improvements that cost money will have to be made in order to comply...we never have that issue as we are providing quality products with higher standards of living.
What do i mean by that??? There is a difference between what is commonly referred to as a "Slum-Lord" versus a Landlord. A Slum-Lord is generally one who will not make necessary improvements for the well being of a tenant where there may be health or safety hazards, may build a couple rooms in a basement to rent out where there is clear evidence of mold...maybe a toilet but no shower, etc...trust me, we have seen it all. To these "Slum-Lords", a deplorable condition is just a space where they can rent that area to a helpless victim for cheaper than market rent...Its just straight up wrong! A landlord on the other hand, runs a business and understands that there are improvements and expenses that will need to be made over time and that these Tenants are people and deserve to live in quality adequate housing. A real landlord will always set money aside each month from the gross rents in a separate account to pay for any needed future expenses.
Back to the Rehab as I digress!!! So here we are, all permits are in and work has begun. Basically, we have one of our many rehab crews onsite and the massive property cleanout and alot of the demolition has already happened, all on day 1 (now thats management). Any walls that need to come down have, bathrooms are gutted (everything has been removed down to the studs), and tomorrow the majority of the debris should be removed...i will be sure to post some pics each week.
The (shortened) General Scope of Work on this property includes the following:
Securing the property, Overall property clean out (est 120yds of junk--or for a visual, its about 3 really big dumpster), 3 new bathrooms, 3 new kitchens, refinish/new floors, New roof (we have 3 existing layers = BAD), new gutters, new front steps, 3 new furnaces, 3 new hot water heaters, fix a lot of messed up walls and ceilings, some new windows, new 3 story rear entrance deck, all new plumbing (Main stack, venting, water lines and gas lines), New 200 Amp electrcial service with 4 new meters (we had Federal Pacific Electric Stab Lock breakers and meters in place...F.P.E. = BAD/fire hazard. Google it, this is a 4-5K Uh-Oh if you miss it when estimating repairs), a ton of paint and last but not least an oil tank sweep (an inspection for an underground tank...we didnt have one, WHEW!!)
Just so we are clear, although i like to make light of the situation, aside from a "Burn Out" or a "Full Gut Rehab", this is the next most intensive rehab and is not something anyone without a lot of experience or guidance should jump into on their own...we are talking more than paint and carpet here people. The proper coordination, communication and planning between the Plumber, Electrician, Roofer, Mason and Main Contractor will dictate if an operation will run smooth as silk or as rough as 30 Grit sandpaper. There are many ways in which one could lose their shirt on a rehab this size and extreme due diligence must be taken before you buy any property as any miscalculation in the ARV (After Repaired Value) and TRUE cost of the total rehab will make or break you. Knowing what to look for is vital as if you get a contractor to give you a quote and YOU forget to mention a big item (Ex. Replace the Federal Pacific Electric panel), when time comes to fix/replace that item, its on you for not telling the contractor to price that out and now you have OVERAGES (No Joke, I seriously just did the Homer Simpson "DOH!" saying out loud).
Anywho, Thanks for reading, and i will be sure to keep everyone posted each week with any progress pitfalls and pointers.
Happy Investing...
Rehab Randy
Comments
Great job, detailed info.
Thanks Randy, I enjoyed your post.
Thanks, Randy! It was good to read and review. See you tomorrow!
Very informative Randy. Great post.