Updated over 3 years ago on . Most recent reply
BRRRR Rehab Question
I am in the process of finding my first property to BRRRR. My question is how do I get estimates for the potential rehab before I buy the property? The biggest issue I'm having right now is finding out how to estimate rehab costs. I know that it's a learning process and a skill that can be mastered with experience, but I want to be able to be somewhat on point for my first deal.
Also, is it wise to meet with lenders who will potentially do the refinance on the property before you purchase?
Most Popular Reply
Yes, learning about estimating the cost of the rehab is a chicken and egg proposition.. You can't get vendors to estimate a job until there is a job to see... But, if you don't have a deal, you can't estimate it and so you can't figure out what to offer.. One way would be to line up the major trades, or the G/C if you have one, before you make the offer. Of course, the issue will be timing. Much of it is experience and good "guestimating." You might have a few false starts. Not sure where you are looking or how your market works, but you could put an offer on the property and get your estimates in during your due diligence. If something flags, then you get out via the inspection clause. its not nice to the seller, but its a pretty standard investor move...
OF COURSE you need to speak with a lender before your purchase. You need to have your financing all lined up before you start the search. You need to know your budgets / financing for the acquisition, rehab, and exit strategy.
Were you planning on purchasing your potential property in cash? That's not as bad. If you were going to do it with a loan, how would you get a lender to get funding for the rehab later? Any "decent" lender will want collateral for the loan which would be the property. But, if you've already encumbered it, you'll have to get money from the "second lender" to extinguish the first loan so that the "second lender" can take the 1st position lien. If you do that, I hope the purchase loan wasn't conforming as your lender will get hit with the pre-payment penalties and your loan officer will lose their commission on that --- they will probably never work with you again.
Its too bad... There is so much out there be it on BP or youtube/podcasts/whatever about finding that deal. But, you really need to figure out what you can afford and how before you go "shopping."
Good luck.