New investor: Rehabbing Questions

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New investor: Rehabbing Questions

Ashley Guerra
New to Real Estate · Trenton, NJ · Member since 2023 · 28 posts · 11 votes

Hello all,

I am reading on the real estate investing process and i plan to buy my first property with an FHA loan, however, as i am no one with any experience on rehabbing i have this concern of pricing.

So when i find a property and get to the inspection part, i understand they find issues with the house, some which can be minor and others major. Now i know things like mold, plumbing or foundation issues sound scary, but is it something i should leverage and not be afraid of and fix or not dabble in that area? Are there any issues that are complete no-go's? i plan to get a property in trenton, nj, which for those of you who may not know, their properties are very old, so finding issues with the house is no surprise.

Also, is this the time i get quotes during this inspection time and see if i have enough reserves to fix the major issues? Or should i already have an understanding of how much things will cost? Is there a generic rule anyone follows that tends to work? how would i know which issues take priority over others (i.e. replacing roofing, fixing plumbing)? If i dont have enough money for major issues, does that mean i cant afford my home? If theres a lot of major issues when do i know i need to let go of the deal?

Sorry for all the question. Just looking for more knowledge and understanding. Anything helps!

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    2y

    Hi Ashely,

    Unless you have high reserves and risk tolerance, it would be a good idea to steer away from major or even medium rehabs such as foundation or electrical. Cosmetic rehab have lower risks and can still yield good returns. It would be a good idea to have an idea in mind of the price/sqft for the rehabs you have in mind, so you don't end up making offers on properties you can't close. A good, investor-friendly agent should be able to help you on this.

    310-848-9776
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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    2y

    @Ashley Guerra yeah, properties in nj tend to be very old.  To start, its really best to be nearly "turnkey."  Have you owned your own home, yet?   You don't have any experience with having basic repairs much less remodels done.  

    Inspection periods in NJ as you may know are customarily 2 weeks.  In this market, trying to extend them or be provided extra time may be difficult given this strong seller's market.

    Generally, yes it would be good if you have a "feel" or "inkling" of what it takes to repair/replace stuff.  That comes with experience --- basically having paid for it already.  Isn't that the stereotypical story of every homeowner.

    Trying to figure out priority is almost a matter of which leads to the most damage / liability.  Roof leaks just suck because water damage is generally "bad."  But, so are plumbing leaks...  Yes, if there are lots of major issues and you can't afford them, then you can't afford them.  Sure, people will say that you should negotiate the price down, but you still need to find money to do the fixes.  Also, you need to coordinate and get those fixes done correctly and quickly.  Lets face it, not everybody is cut out to be a project manager, and not necessarily on their first or second try.

    I would advise caution.  Too many have "jumped in with both feet" and gotten burned.

    Good luck.

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