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Real Estate Renovations in New Brunswick, Canada

by Mike Melvin , Saint John, New Brunswick, Canada   

Now that I've found Creative Real Estate Online, maybe I can get something done! I have had a slow start to my real estate investing career picking up only two properties in eleven months. I had no idea there were so many methods out there.

My first deal, from what I have now learned, was a bank REO. It had been listed for over a year before I decided to get up and make an offer. I watched the list price drop from $64,900 to $30,000, and finally thought "How can I lose?"

I grew up in the area and knew the type of people that lived there, so I was not scared off by the "bad neighborhood" reputation that had kept other investors away. This particular property was a rumored drug house and on first inspection, I did find syringes in many rooms.

I talked to some of the neighbors, and they were very happy to relate all of the goings on surrounding the place and how happy they were the bank had taken it back and kicked out the "scum" that had lived there. This, in my opinion, was the bad apple property in the area, and I had a chance to make it better.

I put in my offer; they countered; I re-countered; they accepted $21,500 for a two-unit. By the way, I did not have $21,500. I took cash advances on two credit cards totaling $5,375 then took the Purchase and Sale agreement to my bank for the rest as a collateral mortgage. They agreed it was a good deal and gave me the money.

The renovations were mostly cosmetic with a couple of holes in the plaster for good measure. The bathrooms were small, so I decided to move a wall per apartment, add soaker tubs, pressure balancing showers, new vanities, mirrors, and lights to make the bathrooms the center of attention for marketing purposes. I added new paint throughout and new carpets.

The appraiser was surprised at what he found. My new appraisal came in at $31,500 per unit, A good $10,000 more than other units in the area! (Bathrooms and kitchens are an inexpensive way to add value on a per-dollar return on investment, in my opinion.)

From the new appraisal, I refinanced at 75% LTV ($47,250) and carried away a check for over $9,000 with a positive cash flow of $400 per month! From start to finish was only 45 days. Not bad for a first effort, and the neighbors love me for the work I've done.

My next project was an estate sale of a three-unit building. It too was in a bad part of town, just on the edge, though, right next to a heritage area, so I thought it would be worth the once over. One of the units had been occupied by the 97-year-old owner before he died. He was a chain smoker and had not painted since 1976. I could scrape the tar from the walls with a fingernail.

The list price was $79,900 down from $84,900. I offered $50,000. The family countered with indignation, and I then listed out the reasons for the low offer. Now, I have to admit, I had a vision of what this place would look like when I was finished.

It had two very large apartments, 1675 sq feet each with great layouts and a first floor of about 1000 sq feet. that had been renovated in the last ten years, but obviously by the previous owner and not a professional tradesman.

I saw "executive" written all over these units. The local papers were filled with stories on how there was such a lack of quality housing in this area of the city. I knew right away which market I was going after. I ended up paying $50,750 after explaining I could go no higher and would walk away if this offer was not accepted.

That went great but in order for my bank to give me the money, this time they wanted an appraisal! It came in at $95,500. Done deal! They gave me the collateral mortgage.

Now for the renovation. I convinced the bank that because I already had so much equity in this building they should also give me a $20,000 line of credit, so I could turn it into executive apartments. They did.

First I replaced the roof, then came the dumpster. Seven of them over the next three months. The reason it took so long is that as I began to renovate, my plans "evolved." I would be working on one thing and find some new problem. "That wall would have to come down, too" one of my carpenters would say. I would sigh.

In the mix of all of the gutting, a provincial electrical inspector happened by. He stopped, checked the dumpster, saw the knob and tube wiring, checked his list of current permitted jobs, and put a stop to the work--at least until the proper permits were in place and a licensed electrician was hired.

Permits? Electrician? That was new to me. But I complied and now know to get all the proper permits. The inspector helped me add a lot of value to my building. Lathe and plaster, knob And tube wiring, plumbing, old lights and fixtures, orange shag carpets, rooms full of belongings, books and albums along with all other sorts of items the family did not want, all had to be carted away.

Being an old building, there was not a straight or level line in the entire building! I strapped almost every wall and ceiling to accommodate 13,000 sq feet of drywall!

Long story short, the new appraisal came in at $141,000, and I have a $1,130 per month positive cash flow! Unfortunately a large amount of the equity is still tied up in the property because my bank would only give me a 60% LTV mortgage. Meaning I must sell it, and I have just accepted an offer of $147,000.

Let the education begin. Bring on the next project and thanks for what I've learned so far.

 
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