A 1912 foundation held up by nothing but the dirt around it is a lesson worth 47k and eleven weeks

Take a 2,000 sq ft foursquare bought at 186, ARV modeled at 435, budget at 158. A buyer with framing experience might price a project like this with real confidence, and that confidence is usually the risk. The scope: full mechanicals, kitchen, three baths, refinishing original floors, and finishing a basement to add a fourth bedroom and a bath. The basement is where a deal like this usually goes wrong. A pre-purchase inspection noting typical settlement cracking, monitor, is easy to read as routine on a rubble stone foundation with some bowing on the north wall and mortar in poor condition. What that note can actually mean is that the wall has lost most of its bond and the interior grade is the only thing keeping the wall from moving further. Remove the interior slab and dirt for a basement finish, and the thing holding the wall is gone with it. An experienced excavator catching that before work goes deep is the best outcome available once it's discovered mid-project. The cost of a case like this: engineer around 2,400, underpinning and rebuilding 34 linear feet of foundation wall around 38,000, exterior waterproofing and drainage while open around 6,800. Call it 47,200 against a basement scope originally budgeted at 41,000, which still has to be spent afterward to finish the bedroom. Eleven weeks of added carry at 4,400 a month adds roughly 11,200, plus an extension fee. Killing the basement bedroom and selling as a 3 bed at 412 instead of 435, all in at 259 including the foundation work, still nets a real profit, just far below the 71k the deal was modeled at. Two lessons worth carrying forward. Framing experience is not foundation experience, and treating them as the same is how confidence outruns diligence. On any pre-1940 house where the basement floor or perimeter grade will be touched, a structural engineer during the inspection period, typically 800 to 1,500, is cheap insurance against a five figure surprise. And avoid putting the highest-uncertainty scope item at the center of the ARV. When the value depends entirely on one contingent bedroom, there's no fallback once that scope item is threatened.

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omar_haddadPassivePRO

The second point is the bigger lesson and I think you're underselling it.

I've watched three deals in my own book go sideways the same way. The ARV rests on one scope item, the item turns out to be the risky one, and when it goes you don't lose the increment, you lose the whole premise. Bedroom counts, ADUs, garage conversions, anything that changes what bracket the house sells in.

What I do now is model two ARVs. The one with the value-add item and the one without. If the deal only works with it, the item needs to be de-risked before I close or I pass. On yours, 412 without the bedroom against 186 purchase and 158 budget would still have penciled at maybe 40k. So the deal was fine, and you'd have known your floor going in.

On the foundation: "typical settlement cracking, monitor" on a rubble stone wall with bowing is a general inspector telling you he can't assess it. Mine writes it that way as a matter of course. It's a referral, not a finding.

The part I'd disagree with slightly is the engineer during inspection period. On a rubble foundation you can often tell a lot with a plumb line, a flashlight and an hour, and 800 to 1,500 per house across a pipeline gets expensive if you're looking at twelve houses a year. I'd say pay for it when you intend to touch the slab or the grade, which is exactly the rule you wrote, so maybe we agree and I'm just being difficult.

omar_haddadPassivePRO

A 1912 foundation held up by nothing but the dirt around it is a lesson worth 47k and eleven weeks

2 replies