Imagine receiving a $20,000 check to purchase a rental property. How about step-by-step guidance from some of the most experienced real estate investors in the industry? Well, that’s exactly what the Dream Investment Adventure series is all about.
Follow along with our contest winner, Joe, and his journey of purchasing an out-of-state rental property. Through the mentorship of Steve Rozenberg, Head of Investor Education for Mynd Property Management, they learn about investing remotely.
Dream Investment Adventure Recap
Last week, Joe closed on a deal and started the process of finding contractors to rehab his out-of-state rental property. Let’s continue on the journey—specifically, we will learn how to complete a rental property rehab and the importance of property management.
Remote Rehab Best Practices & Lessons Learned
Let’s learn about the mistakes Joe experienced that helped him become more business-oriented in his thinking. These lessons learned can help you to prepare and avoid the setbacks Joe experienced during your own real estate investing journey.
Set a Budget
First, set a tight budget for the rehab. Plan for unseen expenses. In episode 5, Joe calculated that he could almost double his initial budget and still meet his goals. That left him with a significant buffer to cover unexpected expenses.
Plan for ‘Gotchas’—They Will Happen
Joe’s first “gotcha” involved new siding. Due to local laws banning vinyl, he had to find an alternative.
The second “gotcha” moment dealt with roof issues. The roofers discovered there were two layers of shingles to remove. Water damage on the plywood was more than they expected. The change order cost an additional $2,500.
Overall, the rehab went smoothly and stayed on-time. The home is bigger with the fourth bedroom and brighter with the reinstallation of unused skylights.
The final cost of the rehab was $34,500, which gives Joe a cash-on-cash return of 15%. That is 3% more than his minimum. ARV is estimated to be $170,000-175,000 with the addition of the fourth bedroom.
Lessons Learned During the Rehab
There are always lessons to be learned that help you become better at remote investing the next time. That is an important part of the process, so take it as an opportunity to grow as an investor.
Pro Tip: Bring a contractor into the process early.
Having a contractor in place early helps in your budgeting. Getting a bid before the offer is an advantage in multiple ways. It will provide more accurate rehab estimates and can help with your offer negotiations. It is also going to give you better numbers to use in your calculations. The more accurate the numbers, the more confident you can be that the property is going to meet your goals.
Pro Tip: Have a buffer in your budget for the unexpected.
Know the unexpected will happen, and the rehab cost will grow. Start with a tight budget that allows for some expansion. Set the maximum budget limits you need to stay within to meet your goal.
Pro Tip: Investing remotely is easy with the right team in place.
The largest difference Joe noticed about remote investing was the time advantage. He wasn’t spending hours a day on the property site trying to do things himself. Remote investing felt less like having a second job. Using a team significantly reduced the number of hours he needed to commit to the project.
Transforming From Landlord to Investor
Remote investing forces you to stay laser-focused as you manage your team. You are working on your business, not in it. No more wasting time with distractions on the site. Every decision is backed by the sound advice of your experienced team. Every step in the process is made with intention.
Stick to the strategy, and meet the goal.
Repeatable Remote Investing Formula
The remote investing process is copy, paste, repeat in any market. Analyze each experience and identify what you could have done better. How could you have made the process more efficient?
Take the lessons learned from each deal and apply them to future investment opportunities. With each remote deal you make, it will become faster, smarter, and easier.
Homework Week 7
Joe’s homework for next week is to talk to Mynd Property Management about getting the property on the market. He will learn what the expectations are, including the rent rate and expected days on market.
Tune in next week to learn how to virtually lease for remote investing and why picking the right property management team is critical to reducing time on the market.
To learn more about Joe’s investing journey, gain access to investor tools and resources, and help your own remote investment journey, check out the exclusive destination page for BiggerPockets fans only.
You’ll also find a limited-time BiggerPockets exclusive offer for property management!
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