When do you bring in an inspector or GC?

Question

So I'll try to be brief on this, I'm going to tackle my first flip within the next 2-3 months and just trying to figure out my game plan in my head before attempting. I've read all J. Scott's books and plan to re-read them I the following week or two.

I'm curious as to when you'd bring in an inspector during a rehab estimation. Would it be before or after the property is under contract?

I'm asking because, like I said, trying to figure out my game plan. So I'd picture it like this:

I find a property that seems worthy of rehab after finding out the ARV. So now I want to actually see what this will cost me, I plan to use subcontractors and manage them myself, but J. Scott's book recommends that I bring in a GC first to tell me a ballpark of what will need to be replaced or repaired (I am clueless for code-violations).

So after I do that, I'd make an educated (hopefully) offer and once under contract, I'd then pay for an inspector to be more detailed? I'm thinking as cost-effectively as possible as GC's here seem to be about 100-250 and spending that every time I want to look at a property more closely may get pricey if I'm not getting any offers accepted left and right. Obviously I plan to get to the point where I know exactly what to look for in my rehabs but this will be a first and I want to do it right.

Any input on how you guys/gals go about this process? I'd love to hear it!

Thanks for any info!

Joshua Pavao

Account Closed · Answer

@Joshua Pavao... looks like you got plenty of good feedback... only thing I'd add after skimming all the responses is to simply start reaching out to whomever it is (GC/inspector/sub) you might need and start making some connections.  Cold calling someone after you have a contract is likely to add to your stress level... give 'em a heads-up on what you're doing... feel each other out when the clock isn't ticking.

Good luck to you!

Joshua Pavao · Answer

@Steven Kopstein

I literally referenced J. Scott's book in my original post lol

He recommends bringing a GC in before making an offer, to get a good idea for needed repairs (for beginners, of course). My reason for asking how others do it, is because if I were to find out once the GC checked it out, that it needs more work than I may have originally thought, now I'll be paying $100-$200 every time for a property that I don't even end up putting an offer through.

Honestly, I think I may be overthinking the entire thing, as I have a detailed excel spreadsheet of J. Scott's SOW and can just use that to examine the majority  of the home on my own. I was really just looking to hear what other people in the industry do and how they approach it.

Account Closed · Answer

Most of the really good contractors I know aren't on Facebook, Craigslist or social media. Call instead of email... go to the local professional lumber yards (as opposed to the big boxes) and ask several different account managers/sales reps for names of their clients. Check with sales managers too.

Mikael Winkler · Answer

Wow, this is a great post. Many times, I overthink things because I just want to make sure I'm thorough. I'm not flipping but purchasing a rental that may need some work. So, we may not be in the same boat, @Joshua Pavao. But, we're at least in the same kind of boat!

Bill Florence · Answer

Hey Joshua,

I handle this in phases before the inspection objection date of the contract (specific to my locale). I have some rehab experience so I personally do a preliminary inspection to make sure I want to go to step 2 and pay an inspector or walk away from the deal. Next I hire an inspector (I trust) come in and inspect. Lastly I discuss the inspection report with my contractors or trades or price out the work myself and create a plan of action with timelines. It is a lot to do in a short time but it has saved me from big mistakes and there is nothing better than having the rehab plan and resources ready to go on closing day.

Lennie Holland · Answer

Your not overthinking it, you just have to organize your thoughts. If I remember correctly, in J.'s book he basically said to:

Step 1. Locate property, do a quick SOW (based on prices for your area), add 20% to your SOW estimate for unknowns. If the property still passes the 70% rule move forward.

Step 2. Make offer based on step 1 with contingencies of "Pass home inspection or Partners approval needed". if accepted move forward.

Step 3. Pay home inspector to evaluate property, Pay GC to help you with a detailed SOW and rehab budget. If house passes inspection and budget numbers makes sense move forward.

Step 4. Purchase property, J. did suggest using GC for first couple of flips at least, rehab property with GC's help. During this time is when you should be learning as much as you can about construction/renovation so you can perform your own detailed SOW/budget for next flip.

Step 5. Sell property.

Step 6. Retire to exotic island, write books about your REI career be the envoy of all BPers.

Well step 6 might not have been a j's book.

Brett Youngster · Answer

Don't spend any money before you actually have a contract accepted. Write contingencies into the offer so that you have an exit in case your repair costs are way off base.

Joshua Pavao · Answer

Thanks Account Closed

Thanks, I'm definitely doing a ton of thinking on this idea, I told myself I won't make any official moves until 2016 comes around. Getting more and more anxious to get "in the game" I keep rereading books and as many articles/blogs/posts on here as I have time to do. Ultimately, I feel it will only benefit me and help when the time to take action has finally come.

Purchasing a rental that may need some work probably isn't too far off from my question here, since you'll still want to know how you should accurately and efficiently go about rehab costs and estimations. After my first two or three flips I intend to begin investing aggressively with rental properties, I can't wait for that passive income to start!

Joshua Pavao · Answer

Account Closed Thanks for the advice, I've actually sent e-mails to about 4-5 local contractor companies, both the advertise on craigslist and I've even seen some local Facebook pages for some. They look like they do great work and have good customer service so I reached out... only to never hear back from any of them.

I plan to post in my local section ahead of time asking for some referrals, hopefully I get some good feedback there as well. So far responses here have been pretty great!

Account Closed · Answer

@Joshua Pavao A home inspector can tell you what's wrong but he will not generally give you any repair costs. A GC can give you some idea of costs but that too has its limits and you should always factor in additional costs for the unforeseen things that invariably arise.

It is also very helpful to the contractor when the investor has a good sense of what he wants.  You should already have researched what the comps look like in fit & finish and have a design vision.

It is generally considered a "consultation" to be asked to give a professional opinion on a property the investor does not yet own.  Once owned, the visit would more be for the purpose of submitting a formal proposal.

When do you bring in an inspector or GC?

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