I decided 2 years ago to take the plunge and buy a house. I had $25k to spend and i was wary of what it would get me and how far from work i would have to move so I decided i was up for the challenge of a fixer-upper. I found one. Initially i saw it as a potential house. It was a dead and decaying 640 sq. ft. workingman's rowhome in South Philly. There were abandoned lots all around. There had been a fire in the house just to the north which schorched a good deal of the roof of this house. That fire brought down that house and the 2 houses north of it.
The previous owners bought it in February 2002 for $9,000 to rehab and resell. They were handymen, or so they thought. As is quite common for such handymen in Philly they try to fix everything but the gaping hole in the roof. The city issued them a 'stabilize or demolish' order because the façade had buckled. They tore it off and gutted the interior down to the joists, without permits. The city issued a "stop work" order and the gentlemen were fined. They stopped work and put it on the market listing it for $25,000. At the time they could've easily gotten $35k for it so i jumped on it offering them $22k. They were sold at $23k. This was October '03
The lot is 9 blocks south of Rittenhouse Square in what was a long undervalued and overlooked neighborhood. The area between Catherine and South Streets gentrified quickly. The southward creep slowed considerably at Catherine because of the crime and drug dealing south of Christian St. North of Christian St. the neighborhood was largely intact although a good deal of the housing was vacant or abandoned. Between Washington and Christian the neighborhood had been nearly obliterated.
They sellers had so many fines from Licenses and Inspections, the Parking Authority, and the Water Dept. that they walked away with $3000 to split between the two of them. This is only after the one partner (the other guy didn't show up) tried to reneg on the agreement of sale at the settlement table (i walked out.) At the next settlement date, 3 months later, the other partner was absent again. The third time being a charm, i only had to wait 45 minutes for the pair to show up. We settled on St. Patrick's Day '04
It took until June (about 3 months from settlement) until we had some rough plans drawn up by the architect. Several contractors agreed that no part of the building was salvageable so we went back to the drawing board. We were running out of cash so we went to the bank to get $10k to keep the architect happy and to finance the initial phases of demo/construction. We spent $1000 of it to secure and stabilize the property. $6000 of it went to the architect. The rest of it was used to repay part of the loan and property insurance.
About 2 months later we had new plans and the size of the house had grown dramatically. We had another architect review the plans and he shredded them with his pencil. He was absolutely right. The mistakes were obvious to us once he pointed them out. We just hadn't been looking. One of the biggest problems was a two-foot easement that straddled our northern property line. Not being able to build on that foot put a lot of unnecessary constraints on the living space itself. It took me 6 months to find the owner, get him to agree to extinguish the easement, then get him to sign the necessary papers.
A year after settlement we sit down with the architect and start from scratch, again. We finished with the drawings in July of '05. Now it's the contractor's time to shine.
I get an estimate from the builder about 2 months later. It' too high so we make a few changes to get the price under control. That takes another 2 weeks. In October I make my first trip to City Hall. I had been incredibly anxious about the entire L&I process machine after all of the horror stories i'd heard from other professionals in the business. I did my homework and went with the proper paperwork already filled out. I was there for 90 minutes one day and two hours a week later. Granted, i'm a lot more familiar with the process, even though i've never done it myself before but 80% of the people waiting with me were architects, developers, or builders. These are people who do this weekly or monthly and should probably have a line of their own.
I felt incredibly sorry for the average joes and janes. The jargon might as well be a different language and the paperwork is worse than a hospital. There is no one there to walk you through the process and you can stand in line for an hour just to find out what paperwork you need.
I turn in all of the required documents, visit nearly every floor in the building, pay $300 to get the water "turned off" (there's no plumbing in the building) and get preliminary approval for demolition. Now it's time to go to the bank for a construction loan. Knowing this could take a long time I ask the contractor for a seperate estimate just for the demo. He comes back with $14k. We get it checked out and that's about normal. We balk.
The project has to move forward but the chances of a bank lending us money to do something we've never done before on a street that's still half vacant were slim. We don't know any potential investors and we could probably only squeeze another $30k in equity out of it.
We go to the realtor that helped us find it and list it (right around Thanksgiving '05) for $99k (with plans and permits) with the understanding that we'll settle for a good deal less. 2 days before our listing was set to expire we get our first reasonable offer - with one contingency - the buyer has 3 weeks to secure a construction loan.
Yesterday, one day before the expiry of the contingency, we hear that the buyer, a real estate agent from the suburbs who has made a name for himself doing this sort of thing (in the burbs), has secured financing. We don't have a closing date as of yet but we should know within the week.
I'm not quite sure what kind of profit he's looking to make but if he can manage to sell it for $300k he'll probably net about $40k. I'm impressed that a bank actually loaned him the money. The dumpsters and contractor vehicles have been moving south in one giant wave at the pace of about a block every 6 months (since i've owned the property). At this point they're less than a block away but they're on the main streets like Carpenter and 18th & 19th. The lots are 16-17 feet wide and 75 ft. deep as opposed to the paltry 14 x 50 we had to work with.