Rehab process and due diligence for BRRRR and flips

Investor · CO · Member since 2020 · 59 posts · 42 votes

4y

I'm quite new to real estate investing, and I have 0 experience with remodeling. In fact, I'm clueless when it comes to the ins and outs of construction, so I'm planning on relying on general contractors for my future projects. I'm perfectly fine with paying more than an investor who is super dialed in and babysits his contractors. I'd prefer to stick with what I'm good at, and that's the numbers and the financing.

I'm currently thinking through what my process would be when I identify a property that could make for an interesting BRRRR or flip. So far, this is what I'm thinking of doing after finding a lead:

1) run preliminary numbers to see if the deal could make sense and what rental strategy to pursue or a flip if BRRRR doesn't make sense

2) do a walkthrough with someone who knows construction (I'm considering paying a retired general contractor to accompany me on these walkthroughs to give me a rough sense of what I'd need done and costs)

3) make an offer

4) hire an inspector to do a formal inspection

5) negotiate further

6) offer accepted

7) get bids from general contractors

8) close

Does this seem like a reasonable approach? I'm just trying to visualize what the process could look like. What would you recommend a newbie with basically 0 knowledge of construction? Please do let me know if my above process is dumb and how I can improve it.

I'm having a ton of trouble finding a good general contractor. It seems like many contractors have large backlogs, too, which only further complicates the process. I've seen more dated recommendations for investors to ask 3 contractors to walk the property with them before even making an offer, and that just doesn't sound realistic at all from where I'm standing.

very well thought out, personally, I would move #7 up to #2, but that is primarily due to my difficulty in finding contractors that I can trust, or will even show up period. If you can't get that dialed in nothing else matters really. If your walk through contractor is reliable and accurate , fine..but what really matters is the actual crew who is going to show up. Personally I'd make the same guy doing the walk thru who will also work on your house. Then you can craft an accurate offer, as opposed to finding out later that all the crews are not available or delayed or increased their prices. Good luck!

2 Reply

Andy SabischPro Member

Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes

4y

We see these posts on a regular basis. The problem is good contractors have little time to invest in first time investors that need a quote to make a bid that may or may not get accepted. They are doing projects that are paying the crews salary. If you do not have the experience to make an estimate on rehab costs and then add a contingency of 15%, you need to get that experience or have a partner that does. Hiring a retired contractor (a recent retiree) will be a better option and one that can work on a tight schedule to view and place an offer than hoping to get a contractor to come over hoping to get a job if you get an accepted contract. If you have a REIG in the area, join and see if you can get together with others that will show you the property, explain what they had to put into the reno and get a feel for local costs. Our last few properties were bought with a 30 minutes walk through, a clipboard and a camera. We had the offer drafted up a few hours later and the property locked up the next day. Other investors were also looking at the property in one case and I knew him . . . he was waiting to get a contractor to look at it as it was his first investment property . . . the contractor never saw it as we had it under contract with a solid reno estimate well before that occurred.

Contractor time is valuable and expecting them to look at multiple properties for nothing before you have an accepted contract is wishful thinking. Your option of hiring a retired contractor is by far a more plausible scenario to help you make an informed decision

3 Reply

William Harvey

Investor · Ashburn, VA · Member since 2020 · 140 posts · 145 votes

4y

@Jack Wang My personal advice (based on my own experience) would be to find a partner who is well-versed in the construction aspect of things to partner up on the first deal with you. This is exactly how I found my current partner, @Dan White. I was a loan officer at the time and financing came super easy to me, and he was a remodeler in the past and construction came super easy for him.

Neither of us had ever flipped a house, but collectively, we had the knowledge to do so. I was able to get the hard money secured for this first deal and then my partner handled everything on the construction side of things (dealing with contractors, bids, etc.)

We both did a part of the business that came easy to us, and to this day we continue to flip houses and our skillsets compliment each other's weaknesses. Again, this is what worked for us and is just "food for thought." I now have the knowledge to handle a renovation, and he has the knowledge to handle the financing side of things, but we still continue to stay in our lanes to focus on what we are good at. Hope this helps!

1 Reply

Khari F.

Kissimmee, FL · Member since 2018 · 150 posts · 27 votes

3y

you may first walk property during inspection to prepare your own scope of work (SOW) based on the inspection and send video/photos to contractor to get ballpark quote and only ask them to walk once under contract. Contractors will tell you what you want to hear - always expect it to cost more and take longer and add a generous contingency (10 to 20%) on top of your contractor's bid to account for the unexpected. contractors who have time to walk property with you for property not under contract many not be best contractor

0 Reply

William Frazier

Member since 2020 · 2 posts · 0 votes

3y

Hey Jack. I'm a real estate investor / General contractor in the Richmond area. I just saw your post from 2 months ago and was curious how you are coming along. I have flipped 6 properties and have 2 rentals in the area. I'm currently focused on growing my home renovation business Flip4Good llc while I work to pull funds out of my last rental and get back into the flipping game. Let me know how things are going. Best of luck to you.

0 Reply

Misty Wilson

Member since 2022 · 5 posts · 0 votes

3y

I invest out of state. My husband used to be an engineer and between the two of us we can reno a house on our own (barring anything that needs permits and true professionals like electrical/structural etc). What has really helped us is having a realtor that is also an investor check out the house for us and do a virtual walkthrough. Based on his judgement and the video we put in an offer with a contingency for inspection. We then have our trusted inspector go in. He's very thorough and takes a TON of pictures. This is key because we need to see what is wrong with the place. After this we have a very solid idea of what it will cost us as a ballpark and decide to move on with the sale or not. We then coordinate with sub contractors as needed. Sure we come out of pocket for the inspection but better that than being stuck with a tear down or having someone get an offer in before us if it turns out to be a good deal.

Bottom line is you'll have to start building a team of trusted individuals to fill in the gaps in your skill set. Others have suggested getting some of this knowledge for yourself and I do highly recommend that as well. Especially if it will speed up your process. Good luck!

0 Reply

Rehab process and due diligence for BRRRR and flips

Rehab process and due diligence for BRRRR and flips

Most Popular Reply

6 Replies