The Palace: A Recap

(House #2) For those of you who have been following me for a while, let me start off by saying thank you for your patience. I have been putting off typing up a breakdown of our renovations at The Palace and finally sat down to make it happen.

The truth is the numbers aren’t straightforward since it also came with a separate lot, and I didn’t know the best way to break them down. Then we got caught up in the next renos. But, any breakdown is better than none so here we go! Progress over perfection.

Acquisition

The Palace was purchased June 2019 at Sheriff’s Auction. We received our confirmation of sale in July and were able to fully take possession in August. The month of August was spent clearing out the personal belongings that had been left behind and getting bids for the renovations.

This was our first property purchased with the intention of being a rental and we wanted to DIY a lot of the work.

Right off the bat we ran into several problems:

#1 The previous family kept breaking in. There were 6 siblings who didn’t communicate with each other. They thought the other siblings were changing the locks and didn’t realize the property had sold. One day when I showed up there was an individual in The Palace, the police came to let them know the property was not theirs and they could no longer be inside. The sibling then asked me to keep an eye out for her dad’s cremated remains. They were missing. It turns out one of the other siblings had taken them previously.

#2 Auction properties are bid on sight unseen. Josh had spoken to the previous owner of The Palace ahead of the sale and had seen the kitchen and living room. The previous owner mentioned that the basement was “a bit damp.” In real life this meant that there was half an inch of standing water pooled throughout the basement floor. Also, there were massive foundation cracks causing the walls to bow inward dangerously. Plus, evidence of microbial growth. Great.

#3 With so many siblings who didn’t communicate with each other it was difficult to coordinate the pick up of belongings that the individuals wanted during the allotted 30 day time period. This caused extra delay. After everyone had claimed the things they were interested in, I placed an online ad & people came with a trailer to haul most of the other junk away. The biggest issue was the hot tub in the driveway. We eventually found someone to take that, too.

Renovation

It seems like every time we removed something, we found a new treasure. Except, it was bad treasure. Like shoddy electric run above a dropped ceiling. Or poorly constructed plumbing.

Instead of the cosmetic upgrades we had initially guessed, we ended up needing:

-new roof
-new gutters/downspouts/gutter guards
-all new windows
-all new glass block windows in the basement
-3 new exterior doors
-structural foundation work
-microbial remediation
-waterproofing and sump pump
-structural issue repair in floor joists
-structural issue repair with ceiling rafters
-all new electric
-all new plumbing
-new hot water heater
-new ductwork and furnace repair
-add in AC
-demo most walls to fix the layout issues
-frame out new walls and install doors for bedrooms
-remove all flooring
-replace flooring down to the floor joists in the kitchen
-install new flooring throughout
-reconfigure and reconstruct the bathroom and kitchen + insulate
-add a bathroom
-drywall
-trim
-paint
-all new lighting and fixtures
-landscaping overhaul + fence rebuild
-removal of deck and pergola and yard shed
-new exterior deck space
-etc….

…basically everything. It’s like starting from scratch. Except we had a fridge! And that ended up moving to the Miller House.

Every time we peeled back a layer, we found more that was wrong. It is amazing that this house didn’t burn down or cave in.

Truly.

I think in the end I filled six 15-yard dumpsters. (The largest size that could fit in the driveway)

Rotted ceiling joists, structural wall that had been removed without any support causing the upstairs floor to sag by 3″.

Bonus Surprises

This house was a “pet house” which is why the hardwoods couldn’t be saved. Months after the pets had left the floors were still damp underneath with what can best be described as a sticky, dehydrated, gelatinous substance- aka aged pet urine. The smell, as you can imagine, was pungent. I had to soak my clothes in enzyme based detergent after wearing them to The Palace.

Additionally, one day when I was doing demo in the basement garage a treat fell into my hands. I promptly dropped the entire pile because IT WAS MOVING.

Nope.

Takeaway

This project had an insane amount of unforeseen costs. We had budgeted to be able to absorb most of them, but the addition of foundation repair and waterproofing tipped the scales. We did a lot of work ourselves which means that this one will always be held near and dear to my heart.

The saving grace of it all was that when we purchased the house, it also came with a separate buildable lot.

We can break things down with the renovation being less expensive and we paid for a lot, or we figure the costs into the renovation and walk away with a free lot. 6 in one hand, half a dozen in the other.

This was nearly the worst case scenario that can happen when buying a house site unseen. Yes, it took more time to remedy, and there were more upfront costs. But we proved that even when things don’t go according to plan we can figure it out. Having a contingency buffer (the lot) made a difference, and being willing to put in sweat equity saved us from blowing the budget even more.

Before we get to the numbers let me show off our hard work!

Music: “I Think He Knows” by: Taylor Swift

Numbers

Being our first full gut renovation (and not knowing that it was going to be a gut when we purchased it) our budget was very fluid. We had a rough guess going in, and spent a lot of time researching and getting bids on this project for the work we were hiring out so that we could learn the costs of different trades.

Spending so much of our time DIY-ing helped us gauge the work involved in different tasks, the correct order for tasks, and helpful tricks and tips for projects going forward. We knew we wouldn’t be as hands on for all of the projects going forward but this helped us build a foundation and momentum.

Purchase Price: $96.7k
Reno + holding + repairs: ~$109K
ARV: $254
Cash left in deal: ~$15k

The Lot: estimated value of $25k-$30k.

Vacant/under construction from confirmation of sale: 10 months
Time from purchase to refinance: (10 months -COVID delay of 2 months)

Being our first full reno, The Palace taught us a LOT! The kids were able to help out on this project and we worked together as a team. Going in I thought it was a slam dunk perfect BRRRR and that we would be finished by Christmas. Obviously there was a lot more work that needed to be done, and we slowed things down by doing it ourselves.

In this beginning stage we weigh the time value and cost value of us completing the work vs paying for it. Since we are just starting out it was more important for us to DIY and save funds so that we could build momentum. Knowing that this level of involvement won’t be forever makes it easy for us to manage mentally. The knowledge gained has proven valuable for the projects we’ve completed since. It also gives us a much better idea for timelines and bids as we walk through potential new projects!

Next:

While working on The Palace we put the Miller House and the Shell House under contract.

  1. Dalton says:

    Love the transparency! thanks for sharing

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We buy, renovate, and rent homes in and around Cincinnati, Ohio using the BRRRR principles. We share tips and information here so you can do the same.

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