My GC just told me the kitchen wall I wanted to open is load-bearing and now I'm looking at a 22k beam versus the 4k I had penciled in for a simple demo

Question

Dallas, Lakewood pocket, 1958 ranch, bought at 187. The whole point of the layout change was to justify the 385 ARV I need to make this work. Open concept kitchen to living was what every comp in a three-block radius has, and I built the budget around doing it. Structural engineer came out yesterday and confirmed it, full LVL beam, new posts down to the foundation, permits, the whole thing. My GC is saying 18 to 22k depending on what they find in the ceiling once they open it, and he won't tighten that range until demo is done. I'm already 9 days into the draw clock. The alt is keeping the wall, doing a pass-through, and repricing the ARV down, but I talked to the agent who sold me the comp at 391 last spring and she said the wall was the first thing the buyer mentioned. I don't have a clean answer here. Either I eat the overage and hold the ARV, or I reprice and the deal gets a lot thinner than I thought it was when I signed.

joe_delgado5 · Answer

Eighteen to twenty-two with an open ceiling unknown is the GC covering himself, which is fair, but that range should tighten to maybe a three-thousand spread once demo is done, not four. I'd push him to commit to a not-to-exceed at twenty-two before you authorize anything, because "depending on what they find" can become twenty-eight real fast in Lakewood where foundations from '58 are not always cooperating.

The pass-through comp argument from that agent is anecdotal and she has zero skin in your deal. One buyer comment is not market data.

If the beam kills your margin below ten percent net after carry and closing, I'd seriously look at whether you can sell the demo permit and the engineer report as part of a price reduction to another flipper and get out, rather than grind through a deal that was already thin at 187.

kenjiito · Answer

The $4k penciled line tells me the deal was already underwritten too tight.

My GC just told me the kitchen wall I wanted to open is load-bearing and now I'm looking at a 22k beam versus the 4k I had penciled in for a simple demo

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