This week’s Income Property featured a young couple thinking three steps ahead in terms of property investment. But will renovation surprises break the bank for Scott’s clients? The DVR cut off the last minute—what happened after the reveal?
Marissa and Bryan are fiancees who saved up a healthy down payment by living with Marissa’s mom for the last few years. Now they want to move into their own space with an income suite (and the potential for more income suites in the future). They found a duplex downtown that already has a tenant in the upstairs unit. Sweet! They will be making money as soon as they walk through the door. The main floor of the house is also in pretty good shape—no need to gut, but new floors and a fresh coat of paint couldn’t hurt.
The challenge for the property was the unfinished basement. From the outset, Scott McGillivray alerted them to a potential mold problem, which was visible on some of the drywall. After investigation, the mold had confined itself to the insulation and tar paper, which is considerably less expensive to repair than if it had infiltrated the structure. However, the house was already pushing the limits of the couple’s budget, so any extra expenses would be a major cut to the wedding budget.
Unfortunately, the crew discovered the wood in the floor had rotted and further investigation revealed a massive termite infestation. The good news: the vermin also managed to avoid infiltrating the structure. The bad news: the cost of extermination and replacing the basement floors added another several thousand dollars to the already-stretched budget.
As usual, Scott went above-and-beyond with the return on investment. Here are the numbers:
- He proposed $1,600 for main floor rent once Marissa and Bryan move out. The appraiser said $2,000. Coupled with the rent from the upstairs tenant, that would bring in a profit of about $1,700 a month.
- The couple bought the house for $620,000 and spent $65,000 on renovations. The house was appraised for $750,000. Wooo!
And here’s what happened after the DVR cut off: