CHUCK & AMY’S SUCCESS STORY

I had a call from an elderly couple who owned a home free and clear in a nice area of Carroll County, Maryland. The house had become too much to keep up and the owners needed to down size. The problem was that they smoked heavily and lived like pack rats. Every room in the house had junk saved from the 30 years they lived there. I don't know how they got around the house! They also had a 100+ pound dog living in their laundry room.



The house was a 1950 square feet, four bedroom, three bath, two story (with basement, unfinished), half brick and half aluminum siding and was built in the early 1970's. The comps in the area ranged from $325,000 to $400,000. The house needed about $40,000 in repairs and upgrading. The kitchen, bathrooms, roof, windows, and siding were as old as the house.

In October 2003, we agreed on $205,000 for the purchase price and settled in November. I ask them to clean out the house of all their belongings (junk). After settlement I started to work on the house and used four 30-yard dumpsters to clean out what was left behind. Originally I did not think the house was that big because of the junk the sellers lived with. After cleaning out all the leftover junk the house became huge. 

I could have flipped the house at this time and made about $50,000 without doing anything - it appraised for $295,000. I chose to keep working on it because I needed to get more experience rehabbing. This was my fourth rehab in 14 months and the best opportunity to make a large profit. I liked the challenge.

In the course of rehabbing, a major problem came up with the basement. It seemed that the sump pump worked continuously. I found that the house was built on a winter spring. (A winter spring is when the water table is up as the Spring season develops. This can create a wet basement if the home is constructed in the spring zone.) In late fall and early winter, the winter spring flows wherever it wants to go and, this time, namely into my basement! I called many experts and they told me I can redirect the flow around the house. Throughout November and December the water flowed and the sump pump worked and worked and worked, but it finally failed one day. Yes, I had three to four inches of water in the basement. I quickly replaced the pump even though the one that failed was only a year old. It must have been tired. 

Here is where the power of prayer comes in. In January 2004 I had the septic/well contractor come in to do the redirecting of water from the spring. When the back hoe operator got down to the footer and continued two feet below the footer, he could not find any water. It had dried up. On the side, I didn't know that my wife had been praying a specific prayer of “God, please dry up this spring." I thought the answer would be that He would dry it up by redirecting the water around the house. He did one better. He dried up the spring. God is good! I did not have any more water problems at all during the rehab process.

The exteriors - windows, siding and roof - were in by March. The roof contractor had to shovel snow off the roof to start working on it. I have never seen a roof put on in 20 degree weather with wind blowing 20+ mph. They were dedicated and did a great job. The interior - all three bathrooms were redone; the kitchen fully replaced and looked great. As I mentioned earlier, the sellers smoked heavily. All the walls and ceilings were tinted in yellow, but were originally white. Nicotine stains. We tried to paint with water based primer but the yellow tint came through. We tried again with a second coat, but again the same problem. We also still had the smell of smoke, so we switched to oil base primer after a little research. This was the answer. I suggest oil base primer for all primer jobs and then switch over to the water base to finish the job. The laundry room (just off the kitchen where the large dog lived) was gutted. I found dog hair up until the last day of completing the rehab.

The rehab was finally completed by June 2004 and placed on the market for $400,000. It finally sold for $390,000 in August.

Here are the numbers: 

Purchase price $205,000
Holding cost 15,000
Rehab cost (over budget) 58,000
Realtor fees 20,000

Sale price $390,000

Profit $92,000

Not a bad profit for working about nine months part-time.

My first 3 rehabs:
#1 - Have a tenant/buyer in it waiting for the sale. Profit should be about $8,000.
#2 - Sold with $8,000 profit. My wholesaler made more money than me.
#3 - Sold with $9,000 profit.

It took me four houses to make any meaningful profit. I was green and it showed. I didn't have any true guidance before the first three houses, but after Steve's boot camp in October 2003 I had the knowledge to make better deals and buy at the right price.

So for the newbies, don't get discouraged. The big profits will come.

God Bless,

Chuck and Amy


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