Middleborough Part 2 | Cost of Repairs
Hey, guys. It's Mike, with House Flipping School, back for the second video of the Middleborough property. In this video, we're going to breakdown what we were projecting for our rehab costs. If you remember in the previous video, we talked about the cost of repairs, we estimated it was at about $25,000, and deducted that from our 70% formula, which bought us to $120,000.
However we bought the property at $115,000. It is critical to mention we're already spending $5,000 more on this property than what we would have liked based on our maximum allowed offer. It was real important to make sure we kept that $25,000 estimated cost of repairs and not go over it, and if anything, try to beat it.
I want to break this down for you and show you the costs and where they came from. As mentioned before this was really a light rehab. Out of the $25,000, $10,000 of that was projected for the septic system and the engineering. The final number came in slightly under $10,000, so we actually hit that projection.
Over here I “starred” garage repairs, because on this particular property, there was actually a thought of possibly pulling this garage down. Sometimes if you look at the cost to take something down and have to repair the area where it comes down, it can be more than sometimes repairing it. In this case, it wasn't going to cost us $5,000 to take it down, but by putting $5,000 into it, we're able to keep a garage and also a workstation in the garage. This definitely was a value-added play here. By putting the $5,000 into the garage, it certainly added probably $10,000+ to the value of the property.
Let me break that down for you: We carried $1,600 for the roof on this garage; we had to strip it and do some repairs on the sheeting. We ended up ripping out the plywood floor, pulled that out of there, and then we had a cement floor poured. By doing that, that allowed us to convert it to where someone could actually drive into the garage. We added a garage door with an electronic opener for $700. Then as you can see, $1,700 roughly for framing, which is somewhat substantial for a garage.
Floors, we originally projected, I think it was around $2,000, and then we upped that to around $3,000 because we ended up changing some things in the house that warranted more money invested into the floors. Paint; we carried $1,000. Heat, electrical, and plumbing was $2,000, and landscaping was $1,000.
These were our budgeted numbers. These weren't the actual numbers that we actually spent. We will breakdown those details more specifically for you when we do our last video on this, with regards to after we close and we really breakdown the hard costs and charges, the soft cost some more, and we'll show exactly where those numbers come in. If you add all these numbers up, it comes out to around $22,000. We usually like to add 5% to 10% on top of that as a safety net. That's how we arrived at our $25,000 budget. That's really the breakdown-just consolidated.
One thing you really want to pay particular attention to is if you're doing a budget on a property, look at the septic system. For the septic system and design, typically we budget $10,000, but you really have to make sure you know which system can go in on a property, because that septic system and design can very easily go to $25,000 or $30,000 if a certain pump system is required.
In my hometown, they're now requiring de-nitrogen systems, which are going to be at least double that price, so I really want you to watch that. If you're not sure, then you should be talking to someone that can do a Title 5 for you, and really give you the lowdown on what that's going to cost.
We recently pulled out of a project-actually it was one of my students. The numbers looked really good, and when we had our engineer come out and do a site visit, we determined it could've been upwards of around $35,000 for septic repair. You see, taking a $25,000 hit on a property that might be projecting $35,000 in profit could do some serious damage to your bottom line.