Real Estate Investing Forums

Real Estate Investing => Rehabbing, Fix and Flip, Rental Properties => Topic started by: lionel47 on September 21, 2008, 12:55:03 pm

Title: Rehab Remotely
Post by: lionel47 on September 21, 2008, 12:55:03 pm
Hi all,

I travel a lot in my day job but want to begin rehabbing and flipping houses. 

All posts I've read here say that you have to be on site every day.  Has anyone ever managed a rehab remotely?  Should I consider hiring a project manager?

My goal is to flip two houses my first year.  The fact that I travel a lot makes it tough but I believe there has to be some way around thus.  Any su :helpggestions?

Thanks. :help
Title: Re: Rehab Remotely
Post by: JaredfromIndiana on September 21, 2008, 02:04:31 pm
That would be a tough way to break into the business.  Well, unless your project manager is somebody experienced, affordable, AND somebody you trust.  I wouldn't recommend it... my two cents.
Title: Re: Rehab Remotely
Post by: jmd_forest on September 21, 2008, 04:24:19 pm
Jared has pegged it right on the money.

jmd_forest
Title: Re: Rehab Remotely
Post by: John_in_NC on September 21, 2008, 06:19:00 pm
Sounds like an episode of property ladder gone bad
Title: Re: Rehab Remotely
Post by: lionel47 on September 22, 2008, 08:54:01 pm
Thanks for your replies.  However, this can't be the first time someone has run into this issue can it?  I mean I'm not ready for this to be the reason not to become an RE investor.  Rehabbing fits my goals.  Any ideas will be appreciated.  Thanks.
Title: Re: Rehab Remotely
Post by: JaredfromIndiana on September 23, 2008, 07:11:17 am
It's hard enough to break into this business and do well when you are on site everyday, I couldn't imagine trying to do your first rehab without even being around. 

I don't think your going to get the answer you want to hear Lionel... it's a bad idea. 
Title: Re: Rehab Remotely
Post by: lionel47 on September 23, 2008, 08:12:48 am
Thanks for the replies.  This is going to take some re-thinking.  The rehab path meets my goals but it's going to prove logistically untenable.  Just curious: do most rehabbers do it full time with no other day job?
Title: Re: Rehab Remotely
Post by: JaredfromIndiana on September 23, 2008, 09:20:02 am
I think it just depends.  I started on a part time basis and then once I had enough money in savings I jumped in full time and quit my job.  I have an investor friend that works full time at his job and then when he has a rehab going he works 4-6 hours a night and weekends to get it done. 

Title: Re: Rehab Remotely
Post by: justin0419 on September 23, 2008, 10:46:32 am
Our property is located hundreds of miles away from where we were living.  I still took time off and went there to do the rehab.  You can do anything if you have enough money, but will you make a profit in the end?  I can't imagine what it would've cost to hire someone to do all the work we needed to complete.
Title: Re: Rehab Remotely
Post by: lionel47 on September 23, 2008, 11:10:28 am
Thanks again for the replies. 

I had been toying with the idea of a weekend-only rehab but I ruled it out due to concerns about the security of the property during the week and the availability of contractors on the weekend.  Also, I imagine holding costs would probably be prohibitive due to the stretched rehab time.

Finding a contractor/partner was another idea I had.  However, half the profit is not appetizing but if it would allow me to work twice the number of deals on an annual basis, it may be feasible.

I am going to continue exploring options.
Title: Re: Rehab Remotely
Post by: brockovich on September 24, 2008, 01:06:38 pm
I stop in at lunch just about everyday when I have a rehab going. I have found a great GC and carpenter to spend the rest of the time on site. There aren't many good ones though.
Title: Re: Rehab Remotely
Post by: j1dias on September 24, 2008, 03:13:15 pm
I think it just depends.  I started on a part time basis and then once I had enough money in savings I jumped in full time and quit my job.  I have an investor friend that works full time at his job and then when he has a rehab going he works 4-6 hours a night and weekends to get it done. 

I have a full time job and I am getting ready for my first rehab. The house I am buying is 1 1/2 block from my work. I agreed with my wife that I will be going to the house everyday after my day job ends and during the weekends. Luckly this first one does not require a lot of work and I will be able to do most of the work myself and hire out the big stuff - carpet, some tile work in the kitchen, and the garage door.

My suggestion would be to get a local partner that could keep an eye on the property. Maybe your wife... or another family member...

Good luck!
Title: Re: Rehab Remotely
Post by: ConnieBrz on September 25, 2008, 08:13:27 pm
I was going to second the wife idea, if you have a wife, because I *am* the wife. :halo

 I also don't know a hammer from a power drill (slight exageration only) but dh coaches me on the finer points, I take pictures if necessary for him to see when he gets home and he keeps in phone contact with the GC.

DH doesn't work out of town, but he does work 12 hours shifts which keeps him off the jobsite for days at a time. We've definitely had a few snafu's along the way because of my lack of expertise (like the time I hired some shy-ster to hang sheetrock who didn't tape the joints, filled them with mud, then fled with the money before the mud hit the floor in huge plops), but overall our rehab business has been profitable (really profitable).  :bigthumbup
Title: Re: Rehab Remotely
Post by: lionel47 on September 25, 2008, 09:03:15 pm
Thanks for the responses.  My wife works as well but has the time to pop into the rehab every day at least once.  I guess she hasn't expressed all that much interest so I haven't been exactly enthusiastic about talking to her about doing such a thing.  She did mention that she could pop in but she is concerned that it wouldn't do much good because she isn't very forceful and doesn't know anything about managing contractors.

Since she brought up the fact that she could pop into the rehab, maybe I'll explore that option with the photos a little more.  I can make calls to the contractor from anywhere.  Thanks for the insight.
Title: Re: Rehab Remotely
Post by: Stjepan on October 13, 2008, 11:09:58 am
I have done many rehabs "remotely" as you put it, most of them turned out just fine, just make sure that you are dealing with competant people and you will be fine.   Remember its easy to make a costly mistake and its compounded when dealing with a project far away from you.   So;

1 work with people you know will do the job right

2 verify everything with a 3rd party untill you know you can trust them.

Do that you you will be fine.
Title: Re: Rehab Remotely
Post by: Jrennick on October 15, 2008, 04:25:16 pm
I'm doing an out of state flip right now in san antonio.  So far we're way way over budget but we still should make a profit.  This is our first one - I'll repost and let you know how it goes.  It looks like it will take 3 months to complete before we put it on the market - so it should be done about a month from now.

Our realtor is the one who found the property.  He is also a licensed plumber and is managing the project.

We've made/are making three trips over there: one to walk thru the property, another to check on the progress midway, and the last one we'll make a punch list.  Each trip costs about $500 per person.  that covers flight, hotel, car rental, and food.  So you just factor that into the expenses when analyzing the deal.

The hardest part was picking out the materials.  Being that it's our first flip, we didn't know the places to go so we were running all over town looking for the best deals.  Next time will be much easier because we now have the knowledge of: 1. where to go, and 2. how much meterials cost.

I have a full time job, and my wife handles most of the details of the flip.  It also helps that she's an interior designer. 

Joe
Title: Re: Rehab Remotely
Post by: lionel47 on October 15, 2008, 06:19:11 pm
Wow, I just got back from San Antonio today.

I am very interested in knowing how you guys fare and how it turns out.  Please keep me posted.

I think it's time to stop thinking and start acting.
Title: Re: Rehab Remotely
Post by: Mr. Rehab on October 16, 2008, 03:17:41 pm
Rehabbing while out of state is not really that hard.  What you will need in order to pull it off is someone who manages the project for you. 


I always tell my in state clients that they should assume the attitude of my out of state investors..Hire competent folks and then let them do their jobs without you breathing down their neck...

If you spend everyday onsite you aren't doing something right...



Mr. Rehab



Title: Re: Rehab Remotely
Post by: lionel47 on October 16, 2008, 03:44:07 pm
 :shocked WOW...that advice is almost the opposite of the advice I received earlier in this thread. Do you have any "must know" advice for remote rehabbers?

I will be jumping into my first rehab soon and I will be doing it while I travel.  I am taking steps to mitigate the risk so hopefully, everything works out.
Title: Re: Rehab Remotely
Post by: JaredfromIndiana on October 16, 2008, 03:52:32 pm
Rehabbing while out of state is not really that hard.  What you will need in order to pull it off is someone who manages the project for you. 


I always tell my in state clients that they should assume the attitude of my out of state investors..Hire competent folks and then let them do their jobs without you breathing down their neck...

If you spend everyday onsite you aren't doing something right...



Mr. Rehab





Mr. Rehab,

Your telling lionel that on his FIRST rehab that just happens to be out of state that it's really not that hard to do?  Just hire somebody to manage it for you and off you go? 

I sincerely hope everything works out for you on this Lionel, just seemed a little too risky for me, especially for rehab #1.  Let us know your progress and good luck!
Title: Re: Rehab Remotely
Post by: lionel47 on October 16, 2008, 04:42:13 pm
Hmmm...well, there are a couple of things that may help me be successful:

The properties we are looking at (three) need an estimated $20K-$30K in repair and have an ARV of $110K-$130K.  The ARV are derived from average recent sale comps within 1 mile.  Question here is whether someone looking for a house at this ARV will be able to get the credit in this economic environment?

Does it sound like we have weighed the risks and taken steps to manage them?
Title: Re: Rehab Remotely
Post by: Mr. Rehab on October 17, 2008, 11:32:01 am

:shocked WOW...that advice is almost the opposite of the advice I received earlier in this thread. Do you have any "must know" advice for remote rehabbers?

I will be jumping into my first rehab soon and I will be doing it while I travel.  I am taking steps to mitigate the risk so hopefully, everything works out.


Lionel, 


Here's what you do...

Go to a local building supply, or Sherwin Williams store and ask the guys there if they know the names of some of their regular customers who rehabs properties..(This won't work at Lowes or Home Depot).  Normally, these kinds of material suppliers build relationships with their customers and they know which crews are good. 

Ask the rehabber to provide photos of work completed, and a few references...

If the rehabber is limited in the kinds of repair services he/she offers, yet you feel comfortable with them, ask if they would accept a fee for project management services.  In other words if you have a good rapport with a painter, electrician, carpenter or lets just say plumber..Let's just call him "Joe"..If Joe the Plumber is willing he can become your PM.  Joe probably knows alot of good tradespeople that he can vouch for..Make sure that Joe has a good digital camera, knows how to use the Kodak photo gallery online, and can receive wired payments...Set up a progressive payment schedule, and payout on the project pursuant to the schedule..

Think about your out of state deals as a district manager would think of running a local Fast Food Chain...You can't be everywhere at the same time cooking the hamburgers, making the fries, mopping the restroom, working the cash register, etc..You hire folks...You hire management..




Mr. Rehab
Title: Re: Rehab Remotely
Post by: lionel47 on October 17, 2008, 12:23:29 pm
Mr. Rehab,

I hear you loud and clear.  This is exactly what I have been thinking.  I appreciate the help.  I am interviewing a couple of contractors soon.  Thanks again.  I will see about starting a blog about my (mis)adventures. :smile
Title: Re: Rehab Remotely
Post by: LuckyLarson on October 20, 2008, 06:01:15 pm
I am surprised nobody asked what price point, margins you are dealing with.  That makes all the difference!  IF you are dealing with a 90K home that might sell for 130K re-habbed, remote management would be very tough.  Thin margins require serious babysitting and a lot of personal sweat!  I have dealt mostly with single family homes and townhomes that I can get for 300K to $400K and sell for 100K+ higher.  It costs roughly the same to rehab a 300K home as a 150K home but often with much higher proffit margins.  I hire out most of the major work to reputable subs and I don't show up every day.  I still do a lot of detail work and being there is important sometimes, like when a tile crew (scheduled 3 weeks ago) is coming tomorrow and the demo crew didn't quite finish the prep work.

Having said that, I have a collegue who only deals with million dollar plus homes and he shows up twice a week but never even touches a lightbulb.  His margins are big enough that a budget overrun of 50K won't even make him blink.
Title: Re: Rehab Remotely
Post by: lionel47 on October 20, 2008, 09:00:43 pm
Thanks for the advice.  I am working on homes under $75K in areas where comps are in the $200K range.  In fact, my top prospect is on the market for $32K and comps are coming in at the $200K mark on average.  Sound reasonable?
Title: Re: Rehab Remotely
Post by: Jrennick on October 21, 2008, 11:15:43 am
Wow, that's pretty good.  Is this in San Antonio?  If so, which area?
My purchase price was 121K, and the ARV is 205K.  We're buying in Windcrest.
Title: Re: Rehab Remotely
Post by: lionel47 on October 21, 2008, 11:35:04 am
No, it is not in San Antonio.  With 121K purchase and 205K ARV, how much profit are you planning on making?  Or, how much do you plan to spend on repairs?
Title: Re: Rehab Remotely
Post by: Jrennick on October 21, 2008, 11:47:58 am
Repairs will end up costing 50K - way more than we estimated.  This is our first flip.  We're using cash so holding costs are very low.  We had foundation problems after heavy rain.  This was AFTER the inspection cleared us of any foundation issues.  The inspection also revealed that the electrical needed to be updated and the roof needed to be replaced. 
So lesson learned - get an inspection before you close and before you estimate your budget.

It's a nice area so it should sell, and we should make a 17K profit.
Next time will be much better because we already have the vendors lined up and we know what everything is going to cost.
Title: Re: Rehab Remotely
Post by: GRIDcorp on October 24, 2008, 07:20:45 pm
I Rehab properties as I rebuild my credit and save money to do my own propeties. A deal I have worked out with two different individuals was:

     I look over the property give a detailed proposal of time and cost outlining ALL the work I plan to do. This sets our price.

In exchange for a small part of the profit I:

     I manage all the subcontractors from the Electricain for new services or upgrage, HVAC, Etc.

     I handle getting all the building permits and inspections.

     If it is a rental I advertise and show the apartments, run credit and criminal backgroud if the owner wishes and of course giving him final approval of all tenants.

     If the place is for sale I show it to potential buyers or work with the RE Agent to coordinate the showing.

     I understand what is really involved in REI so as I work to transition into my own investments I try to make myself as valuable as possible to my investors as I work on building my own team. It also works good to build a buyers list for wholesaling properties as I can wholesale then rehab for the same person. I enjoy taking properties from eyesores to units the neighbors can't  believe are so nice. I like the construction side of things.

     I make good money doing what I am doing and enjoy it.  So soon enough I will have the money to do my own projects. All with an education learned here, REI meetings loacally and through doing rehabs for others.

In conclusion what I would look for is someone hungry to get into the business with a knowledge of construction and have them come aboard and mentor them.
Title: Re: Rehab Remotely
Post by: monthlypayment on October 28, 2008, 04:41:34 pm
Well 99% of the reply is correct.  Unless you know the person and willing to take the chance with this person don't do it.  My rule of thumb was stay within 1 hour driving distance of home.  Example; a friend of mine hired a carpenter to do some work for him at his farm three hours from his house.  He paid him 50% upfront (stupid) and the rest at inspection.  Well he couldn't make a meeting with the guy and sent him more money that totaled 80% of the fee only to find out the work was not done to code and failed inspection and the guy was never heard from again.

Be smart and don't trust anybody without checking out references and suppliers the person uses.