New Investor in need of a little guidance

General Real Estate Investing
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New Investor in need of a little guidance

Derrick Dunham
Bowie, MD · Member since 2013 · 2 posts · 0 votes

Hello!

My name is Derrick and I am new member of Bigger Pockets as well as a new investor. I know a little after serving as a mortgage broker for 20+ years, but I have never actually invested. I have spent the last two months reading the BP blogs and listening to Podcast while in my car throughout the day. This is my first time introducing myself to the BP community, and I do so with dual purpose:

    1. To introduce myself

    2. To learn and get advice

I have come across what I feel may be my fist opportunity to wholesale a property in one of the hottest pockets in Washington DC (Columbia Road and Georgia Avenue NW area). Or, as I am also studying for my RE exam, this could be my first listing.

A previous mortgage client turned friend has inherited this property. It has been tied up in probate for the past year and will be available for either listing or selling by mid Sept 2013. When I put the address in Zillow, I get a zestimate of $411,000. The property needs complete renovation after sitting vacant for many years. The problem is I do not know how to estimate the cost of renovation to properly take advantage of the 70% rule when coming up with a price to offer my client/friend, and then later assigning the contract to an investor. (I haven’t found an investor yet, but because of the area I don’t think that will be too difficult of a task - if priced right.)

I have heard horror stories about General Contractors. My question is how to find a reputable GC who would give me an accurate as possible estimate so that I can properly offer a price to my client?

My plan and investing strategy going forward, once licensed, is to find good wholesaling deals (under a business name I have come up with) and then becoming the listing agent to help sell for the end investor once the property is ready for resell. Are there any pitfalls to this line of thinking?

Thanks to all for any time and consideration extended to me. All criticism and/or advice is welcomed and appreciated.

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  • Robert Leonard
    Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
    13y

    Welcome to BP, it's a great place to start and continue learning about this business. You are wise to ask before you jump into something like people do sometimes and then say, what do I do now? Before you get into a deal, you need to know your exit strategy and what you need to do to perform each step of the process. I would try to find an investor that you can develop a relationship with who will mentor you through the process.

    I really like Zillow, because it gives you a lot of useful information, but the Zestimates can be way off. Don't put too much stock in that valuation. If you don't want to tell an agent the exact address, you can say you are interested in that street and get recently sold (last 90 days) comps for that area to be able to come up with your own valuation based on features and amenities of similar properties.

    If you listen to the most recent podcast on BP, the guy who did 27 deals in the last year talks about how they found an investor who took them by the hand and showed them how to do their first wholesale deal and all they got for it was a $2500 finder's fee. You may have to settle for something like that just to establish the relationship with an investor who can show you how it's done. It's a relationship business.

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  • Derrick Dunham
    OP
    Bowie, MD · Member since 2013 · 2 posts · 0 votes
    13y

    Thank you Robert! I realize in learning anything there is some type of tuition to pay and I will try to find a mentor to guide me with this deal that fell into my lap.

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  • Matt Vaughn
    Laurel, MD · Member since 2013 · 82 posts · 21 votes
    13y

    I'm new to this investing thing myself, but from my experience as a construction manager, getting an accurate estimate on an extensive rehab can be tricky without a lot of experience. If I were you, I would rack my brain to see if there's anybody I knew that had some good construction experience to help me walk through the house.

    Also, I hear BP has a good book on rehab costs.

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  • Harry M.
    Real Estate Investor · Dallas, TX · Member since 2010 · 449 posts · 173 votes
    13y

    Hi Derrick, welcome to bigger pockets. Congratulations on finding your first possible deal.

    Estimating rehab costs is probably the trickiest part. A lot of GCs will do a pre-purchase estimate for $100 or less. If you know any investors in the area, then definitely ask them for recommendations. If not, start asking friends and colleagues. Sooner or later, you'll end up talking to someone who has had significant work done on their house, or knows someone who has, and has a GC they can recommend.

    Also, you have to figure out the typical level of finish for houses in the price range that the property will sell for, in order to get an idea of what a potential buyer would be looking to do. Browsing a good sampling of the current listings in the area/price range should help a lot with this.

    I'd also recommend at least attempting to do your own estimate in parallel with this. It may be a ways off, but you'll learn a lot more when the GC does his estimate, and see the areas that you were off and things that you didn't account for.

    I second what Matt said about J Scott's books on rehabbing and estimating repair costs. I own both and they are a great investment. I strongly recommend them.

    Good luck!

    -Harry

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  • Jeremy Housekeeper
    Kirkland, WA · Member since 2013 · 33 posts · 6 votes
    13y

    Hi Derrick,

    Welcome to BP! I'm new to investing/wholesaling but I've been working with my folks on remodeling their house for several years now so I have plenty of experience when it comes to locating a GC.

    I agree with Harry - contact investors in your area (REIA, etc.) and try to get a referral to a GC. Also, wake up early and head to your local home improvement store. Chances are you'll run into quite a few contractors as they are preparing for the day ahead.

    If you are in the market for specific repairs (electrical, plumbing, etc.) try to find supply stores in the area that cater to those markets. Here in Seattle we have places like Morgan's Plumbing; these no-frills supply stores get most of their business from contractors and you can easily ask around for a few good names in the biz.

    I would cross-check names with Angie's List or the BBB but I honestly don't put much stock in these resources. The BBB gets its income from the businesses listed on the site and tends to slant towards those who pay. Angie's list can have decent reviews but the contractors listed will try to charge homeowner prices whereas you need to secure repairs at rehabber prices.

    Congrats on locating your first potential deal! Keep in touch!

    --Jeremy

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