First rehab, how much is too much?

4 Replies

Hey BP! Just looking for some opinions and advice from those more experienced that I :) So I have been listening to to the podcasts for over a year now and am moving to an area where I want to start on my real estate dream. That said, I always heard in every podcast that EVERYONE would joke and say that for their first house they would pay too much, take on too much, estimate wrong, and any number of other mistakes that would happen. Obviously I want to not fall into the same trap! So, I am hoping to set myself some limits and get some advice on how much work is to much work for a rehab? For example, say there is a home that is listed at 40k, but I think I might be able to get it for 30-35k. Homes near by have an ARV of around 80k, and all the numbers work out as long as rehab costs are around the 20k range. THAT SAID, for a first rehab, how much work would be too much work? Say I go into it to check it out and all the walls and flooring are taken out to the studs - too much? Say walls are still up and flooring in but it needs to be gutted more? What if it needs a new roof but inside if mostly ok? What if it is all of the above? And on that note, for a small duplex that's about 1100 sq ft total, what is the HIGHEST rehab cost that you would assume worst case scenario? I will be honest, this is a hard question to ask since there are so many variables, but any advice would be great :)
@Jacob Chapman it really depends on the house and the person. Many new investors might want to find an older property that has ‘good bones’ but has red shag carpet and wallpaper. New flooring, paint, and rent it out. You may not get too dollar returns, but you know what you’re getting into. Once you start removing walls and drywall/plaster, you’re dealing with electricians, plumbers, carpenters, drywall, painters, etc etc etc. some people dive right in... but there’s way more opportunity for issues overruns and who knows what else. What’s YOUR comfort level?
@Mike McCarthy hey Mike, thanks for the quick response! You see that is kind of my problem haha! MY comfort level is really high! For example if drywall is down, I see that as an opportunity to update all of the cabling (internet, power, and cable) if needed or at least you know what it is when you check it out. My wife's comfort level is.... A freshly remodeled home haha. That said she knows and is willing to compromise, but since we are inexperienced it would be best to get some outside opinions. Though I am a big DIYer for the first rehab all of the mayor things we will likely vend out to keep stress and lack of experience from stopping us from ever getting started.

@Jacob Chapman The biggest mistake is looking for "Cheap " houses that need work . 

You will ALWAYS spend more than you planned 

It will ALWAYS take longer than planned .

It RARELY sells for the top end of the ARV .

Your first , and second even third is like going to school , something new every day . 

Originally posted by @Jacob Chapman :
@Mike McCarthy hey Mike, thanks for the quick response! You see that is kind of my problem haha! MY comfort level is really high! For example if drywall is down, I see that as an opportunity to update all of the cabling (internet, power, and cable) if needed or at least you know what it is when you check it out. My wife's comfort level is.... A freshly remodeled home haha. That said she knows and is willing to compromise, but since we are inexperienced it would be best to get some outside opinions. Though I am a big DIYer for the first rehab all of the mayor things we will likely vend out to keep stress and lack of experience from stopping us from ever getting started.

 Yeah I'd much rather deal with a home that has the walls down to the studs to be honest. Drywalling isn't that much of an expense and it's a selling point.