Big mess in an over stuffed suburban garage.
How to Budget a Rehab on a Hoarder Property


If you’ve been following my videos on BiggerPockets, you probably remember that recently my company bought a former marijuana grow house. It was an illegal operation that was raided by the police. We purchased it from a seller, walked you through it in a prior post, and then trashed it all out. Now we’re working on flipping it.

This home was filled with grow equipment. It was an active grow house when we bought it.

One of the main tips we mentioned before is to not get distracted by all the garbage, all the gross stuff, if you get your hands on a property like this. Let me show you what it looks like now that it’s all out and how easy it’s going to be to get a scope of work going and get your contractors moving.

How to Quickly Assess a Property Filled with Junk

If you watched the last video, this one begins in the same location the last one ended. There was stuff piled up everywhere on this level of the home—grow equipment, aluminum foil, and so on. But one of the biggest lessons we told you guys to take away from it is don’t be distracted by any of that stuff.

Once you get everything out of a property like this, it’s going to become a normal project. This is an old house, built around 1910. We knew there was going to be a lot of stuff we had to do to it, so we gave ourself a big budget.

One of the main things we knew we’d have to deal with is the electrical. We knew they hacked into what existed to power their grow operation, so we already budgeted for a lot of brand new electrical.

What we saw when we walked through the house the first time was that it was not up to code on a lot of levels. And once we take the rehab to a certain extent here in Seattle, we have to bring a lot of stuff up to code.

For instance, there’s not enough outlets. There are two-prong outlets, meaning it’s not grounded. And it’s that way throughout the house, so we knew we’d have to do a lot of electrical. We didn’t need to carefully inspect every inch of the property to conclude this.

Another thing we knew we’d have to do is a lot of sheetrock. There’s currently lath and plaster on almost all the walls, which spiderwebs out when you cut into it or remove parts of it. It doesn’t make it easy to repair. It will just start cracking and crumbling off.

So we made the big decision to rip it out and put new sheetrock in almost everywhere. Again, we only needed to see some of the property to figure this out.

Related: Video Walk-Through: How to Analyze an Investment Property

We also didn’t like the floor plan when we walked it. The kitchen is smack dab in the middle of the house. Nobody likes that these days, so we have to move the kitchen to make it work—especially with the value we want to get for the property.

Before we even move the kitchen, we know it’s going to take a lot. It takes framing, electrical, and plumbing. So again, we knew we’d need a big budget for it in order to get top dollar and to make prospective buyers like it a little bit better.

We decided we’re going to keep the bathroom on this floor where it’s at and move the kitchen elsewhere by knocking a lot of walls down. People like open spaces these days. It’s a wow factor.

Related: How to Uncover Amazing Deals by Simply Changing Your Mindset

The Upside of Junk-Ridden Properties

So keeping all of those things in mind, we didn’t need to see all of the space that was obstructed by all of the junk to calculate a budget. We could assume that, regardless of whatever else we may discover, we’d need a big budget for all the framing, the electrical, the sheetrock, the plumbing.

Plus, the best part of settling on the fact that a property is going to require a big budget up front is you can negotiate with the seller.

You can say, “Hey look, we can’t see everything, and here’s what we have to budget for because we are planning to have to do it until we get everything out. So this is what our offer is going to be.”

The same logic would apply with a hoarder’s house or anything similar. And guess what, those people get it; they know what they’re living in or trying to sell you.

There’s one more bonus I want to show you before we go, and it’s outside in the garage.

Remember, we had these big hydroponic cans and planters everywhere in the home? Well, we did some research, and we can sell those babies! Turns out, they’re worth something.

As we were getting all this stuff together, one of the neighbors actually came over and offered us a thousand bucks for all this! We might end up selling it to them—for even more money though, because we think they were lowballing us.

Point of the matter is, if you buy a property with a bunch of stuff in it, sometimes you can sell the junk and make some of your money back. Keep that in mind!

Watch the video above to learn more about this property, and be sure to like, comment, and subscribe to BiggerPockets’ YouTube channel to catch the next episode. We’re hoping to show you the entire process of this property as the flip unfolds!

Do you have any questions about this property? Comments or suggestions?

Leave them below!

 





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