All Forum Posts by: Andy Sabisch

The rehab estimator on BP seems to have issues with pricing especially when you select NO CONTRACTOR.  Not sure if there is a glitch with the program that is being corrected or if it has been that way as we do not use it.  The program does not appear to give you the flexibility to add / remove specifics for projects or rooms.  After you have done a few renovations, you will have a feel for what a project or entire room will cost and get pretty close in a ballpark when you do a walk-through with a notebook or tablet.  These programs that are intended to estimate rehab costs are often using outdated material and labor costs or are overly restrictive in how the rooms are grouped (value, quality or luxury).  Actually some of the YouTube videos that cover estimating rehabs are more accurate than what the programs try to do.  We tried a spreadsheet (Excel) type tool when we got started and spent too much time trying to fit numbers and not enough time doing deals.  See if you can connect with a flipper or someone doing rehabs at your local REIG and see what they do when they look at a property to size up the deal.  I have seen that investors that try to use them especially initially get tied up in trying to fine tune the numbers and wind up missing the deal.

The problem with most of the estimating tools is that they are outdated as soon as they are published without links to get current prices in your area.  The generalities often produce poor results and the unit prices are often way off.  We have tried inputting reno costs after we complete a project and the results are nowhere near what they should have been.  

Use a basic spreadsheet with numbers you can update easily and you will find that they get you in the ballpark quickly.  We put it on a tablet that we take with us as we walk through properties and get an idea as to if the property is worth pursuing.  

Getting a contractor to walk the property and give you an estimate (quote) is the best option but if you are just fishing to see if you can get a property, that welcome mat will be put away quickly - they need to make money and doing free walkthroughs will not fly for long.  We use a select group on properties we know we will buy (unless they find a surprise) and then they know they will get the work if we get the property.  But expecting to get contractors to walk every property you come across is not going to fly especially starting out.

Quote from @Dave E.:

@Josh Danna sir, that quote is complete garbage. There is absolutely no way it costs that much to rewire a house. 5 days x 2 guys x $100/hr is $8000 in labor plus something like $2500 in materials. Ask for backup. What are their material costs. How long will it take? Etc.

Dave, I had the same thoughts.  I have found that contractors that do not want to take a job either tell you as much or bid so high that you will either laugh at them or take them up on the bid in which case they will sub it out to someone else and still make money.  Rewiring a house especially a one floor house is not rocket science.  If you have a plan showing what gets connected to what breaker, it is simply pulling wires and connecting end devices (lights, switches, outlets, etc.). 

If that is the going rate out there I need to get my electrician's license, pack up the RV and head west . . . seriously though, you need to get another few estimates and better yet, connect with your local REIG and ask for some recommendations on who they use.

As others have already said, price does not equal quality and there is more to the product than just the cost of it.  You can find cheap but is it due to a discontinued run that you might find yourself a box short?  What about seconds that do not hold up like the product you thought you were buying or had blems that increased wastage?  

If you are buying the material and either installing it yourself or having someone do it, shopping price can shave a few dollars off the project cost but if you find a flooring contractor that will work with you on multiple properties, they can often find it cheaper than you can.

The surplus stores include your local Restore (we get a number of things from them and if there is more than one in your area, check them all out as the inventory is different), stores that carry closeouts (Ollies is one in our areas) and as has been mentioned, Facebook and Craiglist.

Bottom line is determine what your end goal is for the price versus total installation and see where you come out ahead

As I posted earlier, if you find an electrician that has done rewires on older houses, there should be no wall damage to deal with.  The key is laying out what goes on what circuit BEFORE you start and then it is simply connecting dots from your layout.  The service and panel are the first steps and then start running the runs and branch off as needed.  With a one story house with basement and attic access, anything more than $10K is either someone that does not want the job (but if you want to pay that much they will do it) or someone that has not done it before.

First, have you looked at financing  options that are out there?  There are programs where you can roll the cost to buy and rehab into one loan.  THere are others that allow you to buy with virtually no money down (3%).  You need to have financing set before you start looking at properties so you are looking at the right market.

As far as a flip, how much work are you willing / able to to for sweat equity?  How much will you need to contract out?  Finding quality contractors is another challenge starting out.

You need to see if there is a local REIG that you can join or at least attend a few meetings.  Members can help you in all these areas as well as give you recommendations as you move forward and more importantly, they know teh local market far better than most of us do so they will have insight into areas to focus on and areas to avoid.

We are here as a resource . . . don't overlook the local investors either

We have done a number of older homes (1800s) that had know and tube.  Many insurance carriers will not insure them due to the risk they pose especially  with the overloading most houses have on them.  When we start a reno, we kill the power and rewire starting with new service and a breaker box.

As far as cost, here is a tip . . . most electricans do not know how to rewire the old homes without tearing out walls and the like.  With a house like yours, rewiring is a lot easier than you are being led to believe.  FIrst, you have access to feed power from the basement and attic so tearing open walls is not needed.  The trick we have found after finding an electrician that focuses on old homes is to pull the wide baseboards and run wire behind it and then put the baseboards back.  Cut openings for outlets and switches and feed the wire up from the baseboard run.  To wire ceiling lights, pull the wire up into the attic and then to the light. 

I can give you more details as we have done this many times and an entire rewire can be done in a weekend.  You need to find an electrician that knows how to do old homes.  

What permits are required depends on your specific location - some areas are more lenient than others.  With that said, yes, flippers can and do a lot of the work themselves to save costs but that all comes with a potential downside.  If a permit is required and was not pulled, you can be red tagged and then you will have an inspector on your back until the project is done and likely on future projects.  Another downside if if you sell the house and permits were not pulled and there is an issue with one of the systems that required one, you as the flipper can be legally liable for having done the work uninsured and without a permit.  I find it a lot easier and less stressful to get a licensed trades person to pull a permit for jobs where it is required than cut costs and not.  I have had trades people quote me two prices - one with permits and one without.  I tend to find another person to do the work.  I understand that in many cases the local inspector knows far less than the person that did the work but at least it was permitted and inspected.

If your numbers are coming in where you want them and the profit is there, I would not worry about the corners other flippers are cutting as it sounds like you are doing it the right way.

A band is 15% to 20% as Larry mentioned . . . . a lot is riding on interest rates and that needs to hold the timeline firm or less . . . extend the time and you will lose.

As far as selling, we do not pay a listing agent but use a flat fee broker that gets us the same visibility any agent will get us and ensure we have it priced right and photographed right.  Hurts to pay a buyers agent 3% when the properties we have listed have gone under contract in less than a week (as recently as March) and have multiple offers.  I think that unless agents start bringing something more to the table than opening doors for buyers, the 3% commission will be challenged.

To be honest, we have dealt with agents for decades in personal moves and sales / purchases of properties as investments.  Out of the myriad of agents we have come in contact with there are less than 5 that we could recommend that did anything to earn the 3% / 6% they collected.  The majority wanted that commission check and their service to us and the other party was dismal at best.  With properties online, most agents simply get us in the door and we do the rest - we have the closing attorneys, we have the inspectors that we use for specific inspections, we have the lenders lined up with proof of funds letters.  In other words, the agent gets us in the door and we take it from there . . .and talking with fellow investors, they tend to do the same.  On the flip side, when we sell, I am not paying 3% to have an agent list it when I can get the same visibility with a flat fee broker and it is on Realtor, ZIllow and more.  If an agent finds a buyer, then I will pay but even that seems a high price to pay for a property that sells quickly when priced right and shows well.  The last 5 homes we sold were in the period of rising interest rates and all wrnt under contract within 4 days with all but one having multiple offers.  We set the price as we knew the market, had professional photos taken and the listing did the work.  The last house would never have made it to closing had we not stepped in and ensured the buyer was set with required paperwork and the like . . . their agent was of absolutely no help up to not doing a final walk through which resulted in the buyer having problems after closing.

So in response to your question, we use flat fee brokers to list properties, have a select group (1 or 2) agents that we use to get us into properties and look for pocket listings and in the end, we know the process on both the buying an selling side are going to go through without a hitch.  

I know you are an agent but hopefully you are in that very small percentage of agents that earn the commission they receive.  With the entire business moving to online . . . . the days of 6% commissions will have to be re-evaluated and adjusted.