First Rehab: WHERE TO START???

Question

I am in the process of searching for my first brrrr investment. I found a duplex and after analyzing comps and having my realtor estimate rehab costs, it seems to be a good investment. I am using a hard money lender. What are the steps I should take to get a solid estimate for ARV and rehab cost. Do you suggest I bring in a contractor for a bid? Do I even have time to bring in a contractor for a bid? Do I just take my realtors estimate and add 10% for a cushion? I know there is also a time crunch and I am a little overwhelmed with how to analyze this deal and have it approved by my lender in time before someone else snatches it up (if I do end up wanting to buy it of course).

Will Barnard · Answer

You are putting the cart before the horse here. NEVER trust a realtor's rehab estimate, 99% of them have no clue what they are talking about when it comes to construction numbers. For your ARV, you certainly can get that price opinion from your agent but I would get second and third opinions - including from your hard money lender.

Aaron Schrader · Answer

I would be hesitant to use the realtor for your repair estimates, but for your ARV that is a reasonable request.  But that's also something you can find out pretty easily.  I'd try to take the time to understand what this property would look like if the numbers come in at a worst case scenario, or at least a worse scenario than what you predict, and see if you are still comfortable with it.  At the end of the day, you need to be comfortable with the numbers and how everything looks in regard to that.  If you haven't looked at a lot of properties, it would be in your best interest to start digging in and understanding numbers for repairs, general numbers for what a roof costs, or flooring, or a foundation repair.  Pay a contractor to look at a house with you.  It'd be worth it!

Ned Carey · Answer

@Michael Plante that is my point. You know your market so well you don't even need to go look at the property.

Your profile says you have been doing this for 30+ years. I bet you have looked at quite a few properties in your time.

Michael Plante · Answer

I don’t look at anything close to 100 houses

In person or even online that is not what I do

in fact I no longer even go inside the house I put an offer in and no longer have any inspection nor contingencies.   Full price all cash

I already know the house from seeing that area so much to work in the houses I already own.  Have fixed up and sold

As said in another thread.  I see the house for sale on Zillow.  Hopefully within the first couple off hours of it going up for sale

I don’t go see it

I Google the agents cell phone number I send a text with a picture of my drivers license screenshot of my bank account list of properties I own in the area from the county website and put my offer in

For me this is what gets me fixer uppers in this market

Michael Plante · Answer

For me the analysis takes place weeks of not months before finding the house

I research one area.   VERY thoroughly.  Look at sale prices.   Get ballpark figures for various repairs in that area etc

Then I wait until a house becomes available in that area

I would not have the courage to do it the way you seem to be doing it

Richard Loniewski · Answer

Don't over analyze, use the local realtor for comps and if you have any pics send to a contractor (if you know any. You can also use some basic average costs of things like kitchens, bathrooms, roof, windows, flooring. Good deals go fast so You need to line up your numbers and make that offer ASAP

Ned Carey · Answer

@Justin Rockitter I believe in knowing your market. Look at LOTs of properties. Look at all kinds, open houses, FSBO, auctions, listed properties, Wholesalers deals etc. Take every opportunity to visit other investors deals and ask them what they are going to do to it and whet the numbers are. If you pass a house being worked on stop and talk to whoever is inside.

I have heard this called the 100 house rule. "Until you look at 100 houses you don't really know your market."  I think this is what @Michael Plante is saying

If you go to an onsite auction talk to some of the bidders and ask how they evaluated the property and why they bid what the did.

In the mean time I would not trust a realtors numbers unless they specifically work with investors a lot or flip themselves. Yes i would bring a contractor in to bid. Since you don't own the house yet expect to pay them for the estimate. But look at it as an education.

First Rehab: WHERE TO START???

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