Help Assessing a Deal
Hello BiggerPockets community!
My brother and I have finally decided to take action and look at properties around our area (South Austin, TX.) We found a property that we plan to rehab and we think it has good potential for a high ARV. We have not looked at the interior of the house but we found some issues on the exterior. However, we are not sure if they will cost us a lot to fix. For the experienced flippers out there, would you guys recommend hiring a GC or home inspector to help us assess the future costs? Or how do you guys first go about calculating the numbers?
We hope that you guys can help us as we are eager to obtain our first deal! We appreciate the support.
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@Account Closed
If you are a new investor, I would tell you not to take on a full rehab as your first property. If the sales prices and its on the market is much less than what you think the ARV is, it most likely needs a ton of work. Publicly listed properties in most markets are flying off the shelves if they are a good deal for an investor.
To answer your question, I would have a GC walk it with you to give you a price and then if you get it under agreement, to hire a home inspector.
The reason I say dont take on a major reno for your first project is are you knowledgable enough to negotiate with a GC, write a contract and scope of work and define what it is you want? Most newbies are not and lose their shirts.
Ivan Huerta starting off you'll definitely need to rely on GCs to walk the property with you, but I suggest you spend some time learning how to estimate costs. There are a number of good books on the subject @j scott's being one.
Good luck in your investing!
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Developer
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Ivan Huerta
Hey Ivan, I'm very new to real estate investing and all of my knowledge thus far comes from books, podcasts and forums, so keep that in mind reading forward.
My plan too, as my first real estate investment in the Austin market, is to find and rehab a property. I understand however that the market in austin is pretty hot and a true deal (a fixed upper with good ARV potential) is not going to be on the market long. So if you really have a property like this, unless your the only investor aware of the property, you should expect others to make moves on it as well.
With that in mind, being green myself, I would never buy my first property unless I had an accurate assessment of what the rehab costs would be. That means going inside. I'm hoping that by spring of next year, I'll have networked enough to know 3 or 4 well regarded general contractors and will get all of them to look at the place and give me their estimated rehab costs with a well defined scope of work. By that time, I'm hoping to also have met and befriended (hey! I'm a friendly guy! 😁) some folks experienced in rehabbing who's brains I can pick when issues arise. I'll also have a real estate lawyer, and an account lined up as well as a property management company (because I don't want to manage it myself).
I still have a lot of these pieces to put together before I jump in. Perhaps you have all the above worked out already.
Best of luck and keep us updated on your progress!
Atif
Hello @Chris Seveney thank you very much for your feedback. I am a little concern about the property because I talked to a neighbor and she mentioned that somebody lived in the house since 2005 then they sold it in 2017. After that, somebody lived there for a month and then moved out. I am not really sure if the house has big issues and that was the reason why the last couple moved out.
We do not really want to over rehab and we were planning on do carpet, cabinets, tile, etc. Nothing too expensive. However, if the GC says that needs major rehab, then we will not proceed with the property.
@Kuba F. Thank you very much for your feedback. I would totally take a look at J Scotts book. I have read The Book on Flipping Homes and it has very usefull content!
@Atif F Shahnawaz Thank you very much for sharing that with me! The best way to start fixer uppers is by social networking. If you know the right people you can totally have a great team and that is going to make everything easier!!
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@Account Closed
I have a medium-scope single family rehab project underway in SE Austin. I'm happy to answer any questions I can. Feel free to get in touch.
@Account Closed
A gc will give you an idea of costs and an inspector will just tell you the flaws. I have alot of experience with flipping houses. The most important thing is to figure out the arv and go backwards to see if there is a margin high enough to make sense then how much time will it take to do it. That is, if you put in granite counters as compared to basic counters how much do you think that you can make. And does it make sense. Time is a big one for me. I have to gauge opportunity cost on any property if I will be the gc. If I hire a gc then I will want to know that property very very well to get a good quote from a gc and what is necessary to top out the arv. There are a whole host of questions that I have when checking out a property. For me, its 50% onsite looking at the property and 50% studying the market to determine the necessities to arrive at a suitable arv. I know of a few good gc's out there. Hmu if interested.
Hope that makes sense
Aaron
Hello @Aaron Gordy thank you very much for your feedback! Everything makes totally sense the only thing that I am a little confused in calculating the ARV. Don't I need to have a SOW and a quote from my GC in order for us to see what the ARV is going to look like at the end of the process? We do have a basic idea of what the houses are selling for in that specific area with the same rooms and sqft.
Scope of work is good to have but you need to have an idea of the type of remodel that you will need to achieve the arv that you are desiring. In other words, to max out the sales price do you need to have solar panels, showers with the shower heads coming from the ceiling and from the wall, granite counters, engineered wood floors, etc. Or is simply necessary to make the place look clean with a new paint job? The SOW is far different with each scenario. What is the condition of the place? If you would like me to see it then hmu. I know south austin very well given that I lived there for many years. I can sign any noncompete doc that you like. no worries