A bad foundation can eat the whole margin on a live in flip, and here is a case that shows how
Here is a loss worth studying because it is a common one. Say an investor picks up a 1940s bungalow in Decatur, IL for $87k in January. The foundation has some bow in the east wall, the inspector flags it as monitor, and the seller's disclosure says nothing structural. The buyer figures $8,000 worst case, which still keeps the deal inside a $130k ARV with room to work. A structural engineer comes out in February and returns $31,000 to install helical piers along that wall and sister the floor joists above it. That is not a number you absorb on top of a kitchen and two bathrooms. The total renovation budget was $38k, which already felt tight. So the investor is now sitting at $118k in the house before touching a single cosmetic item, and the comps in that zip have not moved past $135k in 18 months. That is $17k gross before carrying costs, realtor fees and the two years of occupancy the strategy requires. The house was bought to flip out of. At these numbers the clear is maybe $4,000 if everything goes perfectly, which it will not. The two exits are to sell now at roughly the purchase price, take the $6k loss on closing costs and move on, or eat the foundation, do the cheapest cosmetic pass possible, live there the two years and hope Decatur does something it has not done in a while. Which loss is smaller is the question worth working through.
