All Forum Posts by: Kenny Lee

Great question.....and one that there never is a sure answer to and for me has just come from experience, but maybe I can help.

First, know your area and get an idea from various contractors what their full cosmetic rehabs costs, i.e., paint inside and out, flooring, new plumbing and light fixtures, new countertops, etc.  Most of the experienced ones will be able to give you a ballpark per SF as a starting point, which may vary depending on price point and therefore level of finish out.  For me, it's usually around $12-15 per SF for a mid range cosmetic rehab, but usually that can be cut some here and there like painting wood paneling in a room instead of tearing it out, texturing, then painting, just as an example.  And of course your area may be different in terms of cost and also some jobs don't require a full cosmetic renovation, but most of mine have.

Then of course check the big ticket items like HVAC, roof, exterior siding/masonry repair, windows, interior sheetrock replacement, foundation and water heater and know approximately what it will cost to fix/replace each if warranted.   For replacement costs on my average deal, HVAC is 3-5K, roof 5-6K, water heater $1K, and foundation can of course vary depending on severity and whether slab or pier and beam as examples.

Third, decide if there will be any additions, conversions or demolitions whether adding a bath, converting a room to something else, or removal of walls to open up the space.  A good contractor should be able to give you a range on those as well.

Lastly, tally up your estimated costs and add at least 10% but probably 20% as a buffer because they never come in at or below it seems. 

As an example my last flip of a 1500 SF house went as follows:

Full cosmetic rehab -$22K, added bath for the master - $5K, and some roof repair and siding replacement -$1K for a total of about $28K.

I'd budgeted for $25K ($30K max with my buffer) , but decided to add the 2nd bath which added about double the value of what I spent.  Luckily no real surprises other than the spot roof repair which was minor.

It's definitely guesswork when acquiring deals quickly and on the fly, but can be at least well educated guesswork with some homework and the advice and knowledge of a good experienced contractor.  After some experience, you will be able to inspect a house yourself and at least come up with a range.

I probably missed some points, but hope it helps some.  Good luck! 

Anyone have any experience with this company?  Good or bad.  Feel free to PM.

Just started the rehab portion on Monday of what looks to be a promising flip.  All good after week 1 and no real surprises......always the most tenuous part when demo starts and what will be uncovered.  Will be spending part of Easter Sunday mowing the yard myself since I'm capable and want to keep carrying costs to a minimum! 

My biggest two things were getting "lean" in our household, i.e,. no debt other than our mortgage, vehicles paid off, cutting expenses where we could and just saving and saving.  Also did have a couple "side hustle" things that worked out during that time as well that helped.  The second thing was having a partner on the first few deals.  I was the smaller equity position (20-30%), but did it for the first three or four deals and then saved that money too since it was totally a side venture for me and didn't need it for our regular living expenses.  Took a little bit, but finally got to where I could do deals on my own, albeit with hard money. 

Finding the deals is the biggest challenge though.  I've used about every method including wholesalers, listed properties and also off-market deals I find or stumble on.     

My pleasure @Joe Szymczak II  Good luck and let me know if I can help more.  Will say there's folks on here who know a heckuva lot more than me, but glad I could offer you some insight.  Not too far removed from being right where you are. 

Great question.....for new investors, it's often the only option and was for me too.  And yes, to answer your question generally, they are worth it and the positives outweigh the negatives.  BUT only if the deal makes sense once you figure in your HM costs the same as you would your rehab, purchase as well as any other cost associated with a flip.  I'll give you an example.....

My first deal on my own (without a partner), I had about $40-50K liquid to put toward a deal.  Found a house where the purchase/rehab/carrying all total was about $115K (70/40 plus carrying).  After analyzing the deal, I knew my HM costs would end up being 5-7K, but it was a $15-20K total profit.  Turned out I was right and the final total profit was $18K and HM costs were about $6500 of that including points, interest and fees.  So I ended up making roughly $12K, but only had to put up about 20% of the total investment. 

So again, they are a great tool to use for the beginning investor and also I will use them sometimes if I want to do more than one deal at a time.  Nowadays I prefer an asset based lender who will lend on a percentage of the purchase price (usually 80-85%) if it makes sense for that particular deal.  Then I handle the rest of purchase, closing and any rehab costs myself.    

Never used or heard of them, but have used a couple different HM lenders.  Shop around and compare rates and you'll get a good idea of what's good and what isn't.  And some of the terms from company to company will vary.  For example, I'll use one HM lender for deals that are rehab-heavy and a different one for ones that are more purchase price-heavy.  And they don't always have to be local either.  Then just look at each deal knowing what your approximate HM costs will be before pulling the trigger. 

If the paint overall is in good shape, I'd probably not do anything in the interest of keeping the rehab costs down.   But if I were to do anything, I'd just go with a lighter trim color to give more contrast between the trim and the green on the home, maybe a light gray or even white.  And as someone mentioned, maybe a nice rust color of some kind on the front door to blend with the foundation would be nice as well. 

Hi Andy.....familiar spot for many flippers.  You'll more than likely need a hard money lender to help you get the deal done.  They are generally looked at the same as cash for those deals that are as-is or won't accept conventional financing.  Rates are higher.....probably 10-14% currently.....but they cover anywhere from 60-90% of the total deal depending on the lender and the deal.  Some charge points on the front end as well as fees, etc., and maybe a little on the back end.  But if the numbers work out on a deal, they're well worth it.  As an example, the first hard money flip I did, the total profit was about 18K on about $115K total investment.  The hard money lender put up about $95K of the total deal, but also took about $6500 of the profit in interest, points and fees, leaving me with the remaining $11-12K .  Still not bad for both what I had to put up and also the total return on the deal.

I've used a couple of different ones for deals I've done in the area and feel free to PM me and I can give you more info.  Not sure what the rule is here for recommending lenders. 

Glad it worked for you, but saying it's always worth it can't be correct.  Not that I'm against staging, but never done it and always sold at the top of the market in days, not months or even weeks.....and some have had appraisal issues even then.  For me it would have just been an extra expense that I didn't need and would have gone against my bottom line. 

Your market may require it and it may work well to get sold higher and quicker, but not all do.