Newbie needs help - determining costs to rehab properties

General Real Estate Investing
1

hi…im a newbie that would like to start building a real estate portfolio…my strategy (as of now) is to buy or rehab rental properties and to hold them for the long term…i will be doing this in addition to my full time job (m-f )

now in terms of buying rehabs, how do you all determine the costs of the rehabs…do you bring contractors when you see the property? do you just get a “feel” after you’ve been doing it for awhile? can you give some advice and pitfalls to avoid?

thanks!

2

Get quotes from contractors. You can team up with a GC and get numbers straight from the horses mouth after your initial walk-through. That answer is based on you having a full-time job and I’m guessing; not a lot of free time.

Keep records of exactly what materials go into the rehabs along with the costs of materials and labor. Eventually you can set up an automated database to plug in what is needed for a renovation and get an estimate without a contractor present. This also entails constant updating of labor and material costs to keep it accurate. It is very time intensive and required real data from real projects but it will streamline the process if you find yourself mass producing rehabs.

Walking through and getting a “feel” is not smart. Going this route you will forget to check things and will have a preconcieved notion without digging to find the problems beyond face-deep. You’ll memorize what things cost but shooting from the hip when it comes to an estimate is what makes “good” deals go bad.

3

do you think my strategy is a realistic and good way to get started or should I hold off on rehabs until I have more properties under my belt?

4

The equity based funding available for rehabs makes them much easier to get financed compared to small residential rentals. Once you’ve got them rehabbed, it’s much easier to refinance rather than the purchase funding.

Turn your strategy into tactics. Strategy is art, tactics are science. You need real numbers and real timelines with a real plan to execute so your not flailing in the wind of an ambiguous strategy.