25 Jun 2014
Ryan Brignac is a licensed commercial/residential real estate developer for Skyy Bridge Developers focused on the New Orleans area. After Hurricane Katrina, he started flipping properties to help revitalize the comeback of New Orleans and has not stopped since.
The property: Single family home in Harvey, LA
Purchase price: $28K
Valued after rehab: $159.8K
Start and end date of rehab: I started this rehab on December 23, 2011 and finished on February 4, 2012 (2 months)
Why did you choose this property?
The major factor you need to take into consideration when you are buying investment properties is the location of the property and the resale value.
This property had a decent size lot, foundation, driveway and about ¾ good framing, all for $30K. Other lots in this area alone were selling for $45K and I couldn’t understand how no one saw the opportunity that I did.
I chose this specific property because of the vision I had when I first saw it. Your mind has to have a great imagination to see the finished product immediately following your first walk through. Although it was on the tear-down list, I saw the potential it had and envisioned turning it into a beautiful, completely remodeled, 4 bedroom, 2 ½ bath. It also had a very open floor plan with plenty of space for decorating which I knew would be attractive to buyers.
Were there any problems with the property when you purchased it?
Absolutely, it was full of problems. I knew about 90% of them going in and just had to take them one by one as new ones arose.
The main problem was with its framing. There was fire damage on the middle floor so we had to do a lot of restructuring. We also kept running into issues with building codes in the past that had changed. Because this was a complete remodel, we had to upgrade to today’s standards
As a contractor, you will always run into problems. You just have to find the correct solution to fix them as fast as possible and move on. It also helps to be able to do an estimated cost analysis in your head during your first walk through. Luckily, most of the problems were small and could easily be fixed so it only increased my budget a little.
What was your initial budget? Did you stay within that budget?
My initial budget was around $80K, however, we exceeded that by $10K because of some of the fire damage that needed repairs.
The biggest upgrades were that the stairs had to be reframed with 3 stringers, the windows all needed another header, the plumbing needed to be rerouted, the whole house needed to be rewired and we had to make sure all the electrical outlets and breakers were up to code.
What did you spend that majority of your budget on?
The majority of the budget was spent on upgrades. The buyer basically received a brand new home from the inside as we did a complete renovation from all new electrical wiring to stainless steel appliances and fixtures. The only thing that was solid was the brick front exterior and about 80% of the interior framing studs, everything else was replaced and renovated.
One of the most expensive upgrades we completed was the kitchen. We went with solid oak cabinets and picked from a higher class granitite. We also put better doors in the house that were more solid than your normal hollow core door.
What are some tips you have for other rehabbers to cut-costs during a renovation?
The best way to save money is to make sure you purchase the property at the best price possible. If you buy right, you can always discount your property for a good sale and come out with a nice profit. You can also cut costs by being your own salesperson and contractor.
On other hand, do not go cheap on your master bath and kitchen. I would not advise using all cheap materials and cheap labor. The old saying, “you get what you pay for,” is true. If you don’t care about your product and resale brand, in the long run, you will end up giving yourself a bad name as people will recognize you as a cheap developer.
Another tip is to not over build for the neighborhood. I always refer to the comps recently sold, what’s under contract and what is currently listed. Deals that are sold or under contract will always provide you with a detail of what other buyers liked. If your neighborhood is calling for a more high class client, you will not get away with putting in cheaper products.
The flip side to that is if you are in a small middle class neighborhood and you start putting in the most expensive kitchen cabinets, fixtures etc., then your costs will far outweigh the sales prices of recent comps and you will find yourself in trouble.
The best advice I can give is do your homework. Know who your retailers are (big and small), who sells what and at what cost, what they specialize in and where you can get the best deals. Then, you can determine what you are willing to put into your project. Even if you have to buy from 5 or 6 different retailers, so what? It’s a numbers game and you need to watch your numbers like a hawk.
Did you sell the property? If so, how did you market it?
Yes, we sold it 4 months after purchasing it—including the time it took to rehab it. Our company’s reputation attracted people to the property. Along with the layout and price, it was an easy sell.
We list all of our homes on the MLS for our local realtors and put them on sites like realtor.com, Zillow and Trulia for extra exposure. We also send emails to agents directing them to our website where they can see what projects we are working on and the rehabs we have completed.
I’m a normal figure at our local investor meetings where I pitch what deals we have currently on the market, what we’re working on and what we’re looking for in the future.
I am also a big believer in using social networking for real estate. I’m always boasting fliers of my projects through social media. This provides me with a much larger platform to work with as we know exposure is the best key to your business growth.
What, in your opinion, added the most value?
The master bath and kitchen. We tend to spend extra time on kitchen renovations as it is where a lot of people spend most of their time so we want them to feel comfortable. If the kitchen doesn’t have a good feel or flow, it won’t make a buyer feel good.
The bathrooms are also important because you want to provide a place where buyers can wind down and relax. For this property, we upgraded the bathrooms by adding all the new fixtures, cabinets and counter tops.
Was there anything you would have done differently?
The only thing I would have done differently would have been to put hardwood floors and crown molding in all the bedrooms, but because our budget, we decided not to.
Putting in hardwood floors adds a tremendous value to any project. Depending on the size of a property and its resale value, it could increase the value of a property by 10-15%. But again, you have to look at what the comps are in the subdivision you are flipping.
What tips can you provide to investor rehabbers?
You must always know your limits, the max dollar amount you want to invest and keep your emotions out of the deal. If you’re feeling bad that day, are in a bidding war and just want to flaunt your ego to outbi
d the other bidder, do not bid.
If you get caught up in the excitement of the bidding, or if the seller does not want to accept your low offer and now you are considering paying asking price as you think you can find ways to cut costs once you’re in the house, do not bid.
Trust me when I say, you will lose and regret the deal if any one of the above happens. Once you sign on the dotted line, you are committed to the deal. Wouldn’t you rather spend your time enjoying your deal and the product you are building than constantly worrying about how to get your numbers down?
You must also know your craft and investment strategy. People that really add value to a property don’t take shortcuts and their properties will be the ones that stand out. Novice flippers that cut corners and aren’t worried about the quality of their finished product won’t last.
Overall, develop a brand to model yourself after and stick with it. In the long run, having a quality product and a good brand will hold stronger in rough markets than using cheap developers, materials and labor. Eventually it will catch up to you either in a good way or bad. So stick with a value investment plan.