Hey everybody! I am currently working on my second investment property, which is going to be my first BRRRR. I am a little stuck on the BRRRR process and hesitant to make a move. Once I find a property I think is a good investment, should I first show my contractor to get some estimates on the rehab? Or should i try and bargain a price first with the seller and then get an estimate on the rehab? Or do I bring it up to my hard money lender first? First time on the BRRRR method so just want to make sure I make it as smooth as possible. Anything helps, thank you!
While I can't speak for everyone else, I've got such a good relationship with my contractor that I take him along on my first walkthrough on the properties I go see to get an idea of rehab costs and if the building is even worth a purchase. Now I don't tire-kick every single building I see and generally have a good idea of what I want and am serious about them ahead of time so I don't totally waste his time. He knows he'll be getting the business out of it eventually to do the work and doesn't mind taking an hour to go look at his next project.
If I've got something specific in mind then I usually already have a really good idea of where my financing is going to come from. For instance right now, tomorrow, I'm offering on a 3 unit. My realtor had told me about it over the winter but wouldn't give me details. Then about 4 weeks ago he started saying in 2 weeks you can go see it, you're first. So I contacted my bank and lined up the amount of financing I needed. Now I'm ready.
I've also looked at a real fixer that will be a total project from the ground up. It will be a long term project. My contractor and I are bidding out the pieces of that which he can't do like foundation work. That price for the building will be so ridiculously low and the project so involved it will have to be a cash offer.
As you find yourself getting more and more involved and more seasoned as an investor you will find your plans will change and your needs will too. My best recommendation to you if your market is as hot as mine is would be to try to figure out what your goal is. Do you want a BRRRR that is between $50,000-$75,000 with a $25,000 repair budget? Or are you looking at something larger? If you want traditional financing you will need your down payment and most likely your rehab budget unless you get the rehab loan which I forget the number of it. Then once you are pre-qualified I would narrow down your market and look for properties, then make your offer once you find the right property for your goals and budget making it contingent on inspection and financing for your way out of the deal, and get your estimates and your inspections done during this time which is usually a 14-21 day window after the offer is accepted. Then if you don't like the estimates you can disagree with the inspection or use the financing as an out.
Just my opinion. Others may disagree with me.
Hi @Kyle Weinapple ,
Congrats on moving forward with the BRRRR process. I've used that same method multiple times over the past few years. Similar to @Alecia Loveless , the relationship I have with my contractor is to the point where he will come out with me and walk through a potential offer. This really simplifies the process.
Before I had that relationship, I would get a thorough inspection on the property (I still get thorough inspections) and send what I wanted to get fixed to potential contractors. For example: if the inspection comes back with a roof leak, cracked window, and an unreliable furnace, I send that information to multiple contractors for a rough estimate. Additionally, I'll then forward that information to the Seller, using it as leverage when negotiating a final price.
For more cosmetic issues (update fixtures, paint the walls, change the floors, etc.) I have found that getting accurate square footage of each room really helps contractors with their estimates. I'm sure there are contractors on BP that would be able to better contribute to this conversation. Hope that helps.
Good luck with the BRRRR!
Hello, @Kyle Weinapple !
What I have been doing thus far (3 BRRRRs from out of state), is to negotiate upfront before getting under contract with the best information that I have (pictures, videos, etc). Once under contract, then I would have a couple of contractors to get the bids. I think it makes more sense to send in a GC vs inspector for properties that you know will need work. Once you get the estimated rehabs and if the numbers make sense, then pursue. If not, then negotiate with the seller with the justification and quotes.
Hope this helps!