Our first major renovation project! Complete! Well almost :)

[wgraham]

Hi All,



well we just finished our first major reno/flip project and I couldn't be more excited about how it has turned out! I did a couple of videos. Here is a link to the before and after videos.



We still have the "flip" side of this project to complete but we had Canmore realtor tour this morning and the feedback was both positive and honest which I appreciate! We are expecting a quick sale!



This sort of project doesn't happen without a great team behind you and I want to publicly thank those who helped pull this off.....especially since I was on vacation for most of it



First off....my wife Tammy for her support and patience with me. I couldn't even think of doing this with out her!



Second, my Canmore realtor Richard Greaves for finding an outstanding project to get involved with. Richard is one of the best in the valley and I am happy to recommend him to anyone looking to get into the market out here in Canmore (hint....it isn't a buy and hold market here!) But you may want to check out my synopsis of what is going on in Canmore here.



My general contractor Martin Redman and his wife Annie. They took this project by the horns! Like I said, I was in Florida and Arizona (no I didn't buy anything) for most of this project and didn't get my hands dirty until the final stages. Hats off to them for doing an outstanding job.



And lastly to those who have supported my growth as a businessman and real estate investor including those who post regularly on this board with a life time of experience! Don, Russ and everyone at REIN. Thank you. Greg Habstritt and Kourosh Assef from Simple Wealth thank you for your support, encouragement and sometimes raw opinions. I couldn't do this with out great mentors like yourselves!.

 

[REINteam]

The renos look great Wade, congrats on the project. Best of luck on a quick and profitable sale!!

 

[wgraham]

Thanks Ray! My Canmore realtor just did this video to help with the marketing. A very cool idea that I would encourage others to look into.

 

[jonathanpenner]

Wade, when all was said and done would you be comfortable sharing some of the numbers for this project. Purchase price, holding costs, reno costs, transaction expenses, final sale, etc.



Hope you did well in the end.



Jonathan

 

[wgraham]

Here are the rough numbers Jonathan:



Purchase price: $500,000

Renovations: $35,000

Holding Costs: $30,000

Realtor fees: $25,000

Selling Price: $620,000

Profit.... $30,000

 

[jonathanpenner]

That's really helpful. I took one of the excel grids from the REIN forms, modified it and have been plugging the numbers to have a clear sense of what I need to allow for.



I'm very actively looking to flip property in the Langley/Surrey area of Greater Vancouver at the moment. My wife and I have been involved in a few total rehab projects, one as part of a TV show. I've also worked as an Appraiser for quite a few years, so I feel confident in determining the fair market value of a property either as-is or after repairs/rehab. Where I lack the most confidence is in making an offer at the kind of discounts I believe are required based on all expenses (purchase, holding, reno, contingency, profit and selling costs).



Based on a 6 month turn around (I don't know how long your turn around was), your numbers were within a few thousand of what I figured when I plugged in your purchase/reno and selling numbers on the excel form I'm using. So that was encouraging.



Many of the American REI sites and materials talk about paying no more than 65-70% of fair market value for properties. However they are often talking about properties worth less than a couple hundred thousand.



Around Greater Vancouver I am having a hard time believing a person can find properties at a 30% or greater discount (not including an additional discount for rehab costs). Looking at your deal it sits at about a 14% discount off ARV (plus a $35k discount for the reno costs), and your profit is just under 5% of your selling price. Your gross discount is just under 20%. At the end of the day, that's a decent profit. But if the market were to do a bit of a correction it could consume your entire margin.



My question for those with experience flipping and/or rehabbing in strong markets like Vancouver; are discounts of 20% or more off ARV (not including discount for reno costs) realistic to search for in the Greater Vancouver region? I know they're not easy to find, but assuming you work hard to uncover strongly motivated vendors, is it even realistic or just pie in the sky.

 

[richardkp]

Hi Wade - looked at the video and it looks great!! You did a good job and I am sure it will sell fast for the best price

 

[bizaro86]

[quote user=jonathanpenner]My question for those with experience flipping and/or rehabbing in strong markets like Vancouver; are discounts of 20% or more off ARV (not including discount for reno costs) realistic to search for in the Greater Vancouver region? I know they're not easy to find, but assuming you work hard to uncover strongly motivated vendors, is it even realistic or just pie in the sky.





I know Calgary isn't as strong a market as Vancouver, but I thought I'd share this recent experience I had. A property was on the MLS as a handyman special. We've renovated all our buy and holds, and have the skills to do a full reno/flip. I took my estimate of ARV, accounted for holding costs, selling fees, and what it would cost me to do the work, (and then estimated what it would cost to have a contractor do the work), added a profit margin, and made an offer.



The property was listed as sold on MLS a few days later at exactly my ARV minus the amount I estimated it would cost me to do the labour myself. So either someone else can do the work with free labour, free holding, and free selling costs, they're opinion of ARV is much higher than mine or they're making an error in judgement.



In my opinion the vast majority of properties don't sell at a large enough discount to make a rehab profitable, and I would expect finding something at a 30% discount to be extremely, extremely difficult. (Probably have to be a distressed seller you seek out somehow).



I wouldn't consider doing a deal with the numbers presented above, as it doesn't fit my personal risk tolerance, although more power to Wade if he can make that work for him. I've never done any flips, and your reasoning is exactly why, even though I've spent significant time looking for property that would work.



Regards,



Michael

 

[RedlineBrett]

[quote user=bizaro86]



In my opinion the vast majority of properties don't sell at a large enough discount to make a rehab profitable, and I would expect finding something at a 30% discount to be extremely, extremely difficult. (Probably have to be a distressed seller you seek out somehow).



Regards,



Michael






I couldn't agree more Michael. If you are buying off MLS you are paying
retail and there just isn't enough margin out there to pay retail,
contract everything out and make money. There are lots of general
contractors that shop MLS for fixer uppers and they price their labor in
for free.



You need the leads to come to you or you have to be willing to get down
and dirty in the foreclosures market. Either option also requires
factoring in the time and money costs of lead generation.



There IS value in renovating properties for holding purposes, however. I
have a number of clients that do very well by buying distressed
property at retail, fixing them up or adding in a suite, and then
refinancing out the bulk of their rehab capital. At the end of the day
they are usually left with a top notch property for a price very similar
to the run down properties that trade daily.

 

[bizaro86]

[quote user=RedlineBrett]I couldn't agree more Michael. If you are buying off MLS you are paying retail and there just isn't enough margin out there to pay retail, contract everything out and make money. There are lots of general contractors that shop MLS for fixer uppers and they price their labor in for free.



You need the leads to come to you or you have to be willing to get down and dirty in the foreclosures market. Either option also requires factoring in the time and money costs of lead generation.



There IS value in renovating properties for holding purposes, however. I have a number of clients that do very well by buying distressed property at retail, fixing them up or adding in a suite, and then refinancing out the bulk of their rehab capital. At the end of the day they are usually left with a top notch property for a price very similar to the run down properties that trade daily.


I agree with all of what Brett has above. I think a lot of them don't have enough discount to make work even with labour at zero. (And I do run that case, since we do the vast majority of our own labour).



We've definitely done well renovating holding properties, but they've mostly been foreclosures. I think it's a winning strategy (or I wouldn't keep doing it) and it's allowed us to have a B+ quality portfolio at C-/D+ prices.