So I'm looking at purchasing my first investment property. Here's the thing though, I live in the California, the investment property is in Shreveport, Louisiana.
I'm working with an Agent out there, and he has a contractor that he's recommending. But I want to make sure that I'm getting the best return on my money.
My big question is, how do you get the most accurate rehab costs before you purchase a property? Do you have multiple contractors come out and bid on the work before you close?
Do you have one contractor come out and give you an estimate, and then once you close on the property, do you have more contractors come out to make additional bids?
Any help would be GREEAAAATLY appreciated!
Couple of questions:
How'd you pick this market, have you been there, do you understand it?
How'd you find this agent?
What's your background?
From the sounds of it... you exposing yourself to the risk that everyone talks about when going OOS. I'd bet you saw some good returns on paper, but haven't done enough due diligence yet. Which brings up the second issue, you likely lack experience to manage this project for afar or to evaluate the bids.
You could have the agent get you two more bids from other contractors and then you yourself get one from someone else you've found. If they all come back similar in price then you'd have a rough idea of the market prices. CAUTION THOUGH you need to understand what makes up the bids... and that they are all completing the same work, otherwise you're not comparing apples to apples.
I'd save yourself the heartache and study up before you get into ANY deals. If I had to guess this "cheap" and a "good deal" but it's going to very likely become a HUGE headache.
Thanks for the quick response Matt! To answer your questions:
- How'd you pick this market, have you been there, do you understand it? - My mother just recently retired and moved to Shreveport. She bought a fixer-upper and is now living in it with about $25k in equity.
- How'd you find this agent? - A referral from the mortgage specialist my mom worked with
- What's your background? - First time investor. My day job is in Supply Chain
I'm a little more comfortable going OOS because my mom and step-dad are in Shreveport to help oversee the process. Plus, they JUST went through everything I'm going through with their own home, so they've been able to help navigate the process.
But to clarify your suggestion, you're saying you would get multiple bids before you make your offer right?
Tony I live in Bossier City right next to Shreveport. Who's the contractor and your agent. Maybe I know them.
Does this referral deal with investors frequently? You're a different customer than someone looking to retire there.
Is this a buy and hold or a flip?
But yes, get multiple bids. Get your scope of work defined so you know needs to get done and to what quality. This way you can compare the bids. I'd have them break it out by labor/materials that way you can review and notice if things are way off (too many hours, too high of materials).
I would also get a contractor you find on your own, have someone meet onsite for that, it'd be good for you to go visit if you haven't. Either way you need to lock down the bid as best you can so you know what to offer or to walk.
Hey @James Moore ,
My agent's name is Craig Falbaum. And I actually don't have the name of the contractor that he's referring.
I just found a contractor through Thumbtack, his name is Jon Worley of Affordable Construction Services.
Are you familiar with either of them?
Also, do you have a contractor that you could refer?
The realtor has dealt with several OOS investors in the past. I don't know if his contractor referral has dealt with OOS clients before though. It's a good question to ask.
My goal is to flip this house.
And thank you for the detailed response Matt! With this being my first property, I really want to make sure my numbers are as tight as possible going in.
Don't know either of them but I definitely can ask around. Also yes I have a contractor who himself has 22 properties. A+ Services. 3182726235 Tell them Eric referred you.
Thanks for the referral @James Moore ! I just gave them a call and we're trying to have them come see the property next week.
No problem Tony. I highly trust them with all my construction needs.
@Tony Robinson So, if you are the contractor, will you go to someone's property and give them a free bid then re-bid the same after they buy it? In short, you're shouldering costs for your competition. Will you do that? To answer your question, estimate it yourself or pay for an accurate estimate by an estimator. Then invite contractors AFTER you buy it.
Can't ever go wrong. If many other investors have a great experience with them, then chances are they are great. Ask around and trust your instincts. Once you find a good one, keep them forever.
@Todd Fithian Thanks for the input! I'm actually not far from Riverside, so once I start investing in SoCal, I'll be sure to reach to out.
Build your team before you start spending money, will save you in the end!!
@Manolo D. Thanks for your input. I actually already found two contractors that were willing to give me an estimate on the repair costs. So it must be a preference that varies from one contractor to another.
Check out their references and see their past work. You can't be too careful starting out. If all looks good let them know there will be more business in the future as you are trying to build your team. Good luck
@Tony Robinson If and when you start investing in Southern California I know a great contractor that I can refer you to.
@Tony Robinson Good for you, good ones don't for sure. You could burn great ones that way, i'll give it 3 walks free then don't return your call.
@Tony Robinson ... Let me know if you need anymore recommendations or if I could offer any guidance
- @Tony Robinson ... Here are my viewpoints on your big question.
How do you get the most accurate rehab costs before you purchase a property?
- My suggestion would be to partner with someone who has done rehabs in the area you are investing in since you live out of state. You need someone who knows pricing for that specific market. If you start to do rehabs with any sort of consistency you will create systems in regards to the specific contractors you use, pricing, timelines, etc... This will make you more efficient from all aspects of the project and in turn lead to higher ROI.
Do you have multiple contractors come out and bid on the work before you close?
- I would suggest using recommendations from local investors. Also, monitor the contractor's work, ensure they are on schedule and do what they say they are going to do.
- My opinion is when you close on a property you want to hit the ground running and shouldn't be wasting time bidding out tasks that could have been done prior to you closing. The rehab budget should be approved before you close on the project.
@Michael Faulk thanks for detailed response! I'll PM you and we can talk a bit more. 👌🏿