Last year we bought a home from the Detroit Land Bank. It looked great on the outside but it needed a full gut rehab on the inside. It was bad. People came in and stripped it of everything. The furnace, the plumbing, the electrical, all the fixtures in the bathroom. What they left was deteriorated and gross. This house was in bad shape.
I was a newb to all this but not completely new. We had bought something close to turn key ($1k to get going), then we bought something that was a cosmetic rehab (paint, floor, furnace – $8k to get going). We did all of that successfully. Why not bump it up a notch and try something that needed a full gut job?
For some reason, in real estate, after you conquer one challenge you go after a bigger, “badder” challenge. We jumped right off the deep end with this one.
We bought this home for approximately $4k from the land bank after closing costs, travel etc. On the same weekend we closed I scheduled multiple contractors to walk the property. One contractor gave us a bid for $100k. Another told us it could get done for $30k. I finally settled on one that said he could do it for $15k. This is where the problems started.
We ran through so many problems in this deal but each of them made us better investors. Once you solve a problem you systematize the solution and then you have a business.
Our first issue was a squatter. When our first contractor showed up he said it looked like someone had made a cot up stairs and was camping out. He was right. We trashed his stuff but he still found a way to get back in. I immediately installed an alarm. This guy broke in with the alarm but he wasn’t expecting it so when it went off he freaked and ran out. He came back and broke in again and this time he destroyed the arm box. I then purchased some door and window guards. These are metal door and window guards that make the house impenetrable. The squatter got the hint and went somewhere else. Imagine getting notifications when you are sleep that someone broke into your rehab??? Crazy stuff.
The next issue was the roof. We paid money to have the roof repaired but it was still leaking. I didn’t know it rained that hard in Detroit but Detroit rain is like none other. It is punishing rain. Nothing like this light Cali stuff. This shortens the lifespan of a roof and for a house like ours that had holes in the roof I could only imagine the damage it would do to the dry wall and insulation. The roof is the very first thing you have to handle in a rehab. We tried to go cheap but that didn’t work we had to get a whole new roof.
One gem here for the folks is that when we started this we didn’t have all the money to get it done. We just started with what we had and more money found us. I walked into some large limit business credit and I used that to handle the entire roof and some other items. The amazing thing about real estate is that you get the money to do real estate while you are doing real estate, not before. Last night I just casually flicked over $1800 to get something done where I couldn’t even afford to invest in our deals when we first started. You might not be able to afford to get started but you must still get started. Soon you will be a player.
Back to the story. While we were doing all of this roof stuff don’t forget that the entire house still looks trashed.
The problems continued to come though. One day I got a call from the contractors cell phone. It was a hysterical man who was looking for his son. His son was our contractor. He called me because he saw he was calling me a lot. He thought I had info on his whereabouts. Apparently his son was in jail. This means we now don’t have a contractor.
I had to gather myself and realize we just needed to get new bids and interview new contractors. That is what we did. In doing this we actually found a way better contractor who does better work and at a fair price. We settled on the guy we work with now. He reads my online content so I have to make sure I don’t say anything crazy. But he is a good guy and he looks out for us in sending us much better deals than what wholesalers send us.
This weekend I went out there to see that the entire house is in great shape. I personally felt comfortable walking around the house even by myself. Where at first I wouldn’t. I would live there. The before and after pictures are night and day.
That said, this experience, the stress, the fear, the pressure, the uncertainty all make me look at the worst of Detroit homes like “that’s it?” We did a gut rehab which means I know how much every item in a home will cost. This time Ill do it better, faster and more profitably. No book prepares you for that and I have read more real estate books than anyone but Brandon Turner.
In doing this, I also realized that a lot of myths were untrue. The entire time we did this I was scared to invest money because I thought the furnace would just get jacked (again). There are ways around this though. You gotta be smart and you can’t just take anyones advice. This rehab took us a full year because of fear.
Here are some strategies we use to not become a target:
One thing we don’t do is put a sign in the yard. Another is we install an alarm immediately. What I realized is that they usually jack homes that have been sitting A LONG TIME not the fresh house with the alarm and with the view from the inside hidden. Our contractor also drives by the house every day. Most of our fears are based on assumption not reality.
So this experience, while still profitable, set me up. Now I know the process, now I talk the talk, now I am respected. Now I can look at a home and spot the rehab and negotiate/debate numbers with the contractor. Ignorance in real estate can cost you because people will take advantage of you. Not anymore. Now I can look at a home and have the contacts to send someone by to look at it on my behalf. Now I get WAY better deals than I did before I had a relationship with a contractor. Everything that I wanted to do got stronger by running through an impossible rehab.
Even my mentor. When I was starting out he wasn’t trying to invest in anything we had going on but now that he sees I can finish a project he is like “how much you need and how soon can I get it back?”
People are watching you. People might not say anything but they are inspired by your actions not your words. So I got to take more action.
Don’t miss the gem though. I have said it and Charm City said it. After you make an impossible rehab great again you get a superhuman mental strength as if you can do anything.
The number one thing that keeps people on the sideline is fear. By pushing through said fear I now feel like I can do anything no matter how big the challenge. Now I am aiming at what I want not what I think I can get. Now I am jumping into big problems attached to big money knowing that my being will find a way. Now, the thing I’m chasing happen to be attached to a lot of money.
I want to encourage you to take on the challenge. To take on the fear and relish in who you become on the other side of the unknown. That is where the wealth lies. The wealth isn’t in the knowledge but the applied knowledge and what the experience opens you up to. Its just like I say, the degree isn’t success even though we celebrate the degree. The degree sets you up to be successful. The work and projects you implement from said knowledge is the big win.
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