How are people doing rehab right when they buy?

Question

Sorry in advanced if I sound like I have no idea what I'm talking about, it's because I have no idea when it comes to rehabs.

I just bought 2 investment properties in orange county california. Both SFR. My architect is telling me it's going to take at least 3 months to get construction documents approved before I can start any work.

How is it I see flippers buy a house and start work the very next day all the time? Are they just not pulling permits and doing all the work unpermitted?

Eric Teran · Answer

@Chi Ta I’m an Architect and what I do for my developer clients if they want to take the risk is to start the plans as soon as their offer is accepted. They ask for a longer closing period around 2-4 months. During that time we have permission to submit plans and get a permit. The risk is if my client backs out of the deal because they still pay my fees and other consultants. The gain is four months and less holding costs. That’s the legal way.

The riskier way is start the work and hope to get a permit before you call the first inspector. However, a neighbor can call and you will get a stop work order which are expensive.

Another option is you get a demo permit first to start the work and that is pretty straightforward. Unless you demo the entire structure. Another type of permit is non-structural and those are easy to obtain in a few days.

These developers have being doing for a while so they have their system down so much so that they don’t even have to speak to their architect and waste time making decisions. I have two clients like that. I also have first time developers that can’t make up their mind and the project just takes longer to design and submit.

I Hope that helps.

Justin Elliott · Answer

They may be GCs themselves with their own team.

David M. · Answer

@Chi Ta

Well, you really are jumping into this with both feet first, huh?  Two flips and you say you don’t know what you are doing??

As stated by others, there is a lot you can do before closing...  also, not very flip needs and architect.  If anything, I try to stay away from that because it means I’m doing to much (for my strategy).  Learn when you need to pull permits.  There is a lot you can general do withou a permit.

Good luck

Anthony Wick · Answer

Answer: We don't live or buy in California...

Joe Homs · Answer

@Chi Ta I think what scares me the most from your question is that you have purchased two homes and that you admit not having any idea what you are doing.

Let me see if I can put you on the right path.  You should have evaluated all of this up front.  If you have an architect involved then it may just not be as simple as removing the existing items and replacing with new.  Like @Eric Teran stated "Another option is you get a demo permit first to start the work and that is pretty straightforward. Unless you demo the entire structure. Another type of permit is non-structural and those are easy to obtain in a few days."

Most of my flips only require a Demo/non-structural permit.  I recently closed one of my last flips, and the contractor started the next day, finishing in 30 days.  The condo was put back on the market and we received an over asking price the first weekend.  What you need to know is how much work you can perform without needing a permit.  When you start to move walls, plumbing, electrical, or rehab a bathroom you will need permits.  However even with all of this you will probably not need an architect unless you are moving load bearing walls or adding more square footage.

When purchasing a home to flip the most important part is what you pay, then a close second is how fast you can turn it around.  Being prepared up from is very important, especially if you are using a hard money loan.

Good Investing...

Chi Ta · Answer

I mean it takes about 3 months here to get any permits, but I see people posting renovation right after they close. Are people just going without permits?

Darius Ogloza · Answer

There is often a lot that you can accomplish between the time you acquire the property and the time you actually receive your permits.  For example, you can source appliances, materials and labor, attend to landscaping, and do some demo projects and plan your renovations.

How are people doing rehab right when they buy?

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