Statesville Update - The Longest Rehab, a Lesson in Coordination
Updated: Jun 3, 2020
Ok, maybe the rehab wasn't near as long as it is in Gastonia, but given the size and scope of the project it took way longer than it should!
Let me back up.
The entire goal of this property and rehab was to get each of the 6 units stabilized at $450/unit (from ~$350) and complete any necessary rehab in order to refinance and complete the partial BRRRR. Of the six units included in this property, three were in surprisingly good shape from the start and given the rent, there was no real rehab required to bring them up to market value.
By the beginning of February all three of those units were at their target with annual leases in place. The tenants of the remaining three units were given 60 day notice that as of March 1 (short term lease expiration date) we would be making some improvements and would see a subsequent rent increase to $450.
My property manager had some trouble getting a hold of two of the tenants, but they wound up signing the new leases for $450 without any rehab or updates effective April 1. The third tenant turned in their keys in February, forfeiting a security deposit that was equal to about 1.5 months rent. Things were looking good, time for a small rehab!
CONDITION & PLANNING
As you can see from the pictures, the unit wasn't horrible but it certainly wasn't in great condition. There was trash everywhere, the floor was a mess, walls were damaged (especially the grease splash by the oven), and there were definitely some roaches that needed to be taken care of by an exterminator. Additionally, if the range and fridge weren't tenant owned they sure became that way when they moved out, so those needed to be replaced.
The plan was pretty straightforward - get the place painted, lay laminate flooring, install the new appliances, and install a range hood in the kitchen.
THE JOY OF CONTRACTORS
The project proved to be an exercise in patience with contractors. As opposed to my Gastonia project where I've done a significant amount of the work myself, the goal with this unit was to have it all hired out because I didn't have time to get it done.
I believed that the two most time consuming tasks would be painting and laying flooring, so I prioritized getting those done as fast as possible. The contractor I had lined up to take care of both on day one never returned my calls and never showed up, requiring me to move to plan B.
After reaching out to a couple of other people for estimates on the work I got it lined up and the painting began. I had a significant amount of laminate flooring still on hand from what I picked up on Black Friday last year ($.50/sqft, thanks Home Depot!), so I dropped that off at the unit to get it installed.
Before you ask, yes I did cover up those hardwood floors. Just like I did in Gastonia. Why? There was no ROI from refinishing them. It was significantly cheaper to install laminate, they're significantly more durable, and whether laminate or hardwood the rent rate won't change.
With the painting done and the flooring installed it was starting to look good! All that remained was the little stuff - install the range hood, throw in the appliances, swap out the outlets and light switches, and install blinds.
Those little things took about 3 weeks.
The contractor was horribly slow, ran into a couple of seemingly minor issues that required bringing someone else in, and at the end of the day did relatively shoddy work for the time he took and the amount he was paid. I (once again) learned the valuable lesson of making sure to be explicitly clear about the work that needed done, down to the finest detail as many of those unaccounted for details were missed.
STABLE-ISH
At the end of the day the work got done and the rehab was finally complete. A tenant moved in, and all units were leased for $450 each. As you can see from the pictures, it looks significantly better than it did before and despite all of the headaches, the extra time and money it took will mean very little in the long run.
Naturally I was pleased to have the income where I wanted and have everything stabilized so I could initiate the refinance, but then this little thing called Covid-19 creeped in to mess with my plan. It turns out a global pandemic isn't incredibly advantageous to the cash-out refinance process...who knew??
The next steps are still in the process of being worked out, but in the meantime the property is still producing a 19% COCROI based on the rehab that's been done and the money left in. That stands to increase as money is pulled out! So stay tuned