My First Rehab!!
I am ready to offer on my first rehab. I am so excited, but nervous too. Will some of you share the details of your first purchase and flip on a rehab? Did you run into many problems? Did you fix it or get a contractor? Also, any advice on what to make sure I do or avoid would be greatly appreciated!!
I do quite a few rehabs. Make sure your repairs estimates are good and then add 15% at least to that total. Be prepared for unexpected expenses. I act as GC and hire my own subs. I used to do all the work myself, but I can turn them alot quicker if I am just supervising the work. If you hire someone to do work, get everything in writing and NEVER, NEVER paid ahead. You always want the work done to your liking before paying anyone. It is also important to have your exit stratagy clearly defined. You need to know before you make the offer how to plan on selling. I always have a backup exit strategy. If I have problems selling quickly, I will refi and pull my cash out and rent or l/o. You want to make sure you will have positive cash flow it you go this route. I sure others will chime in with some other thoughts.
pinky: How are you financing the fixer?
I am getting 100% financing on a construction loan. I just got back from the house again. It is difficult because I keep thinking " I wouldn't want to live here unless....." Then I find myself thinking it will cost to much to fix up. In reality though, what it needs is interior and exterior paint, carpets, yard clean up, gutters and maybe new cabinets. It is listed at 185k. It is a short sale. The agent said she wants it but it is a conflict of interest. The bank is taking offers until Wednesday. There is one from an agent, and she said one from someone with 100% financing and acted like they didn't have a chance. Does this mean I don't either?? Oh ya, and I figure all this work can be done by a handyman, or people I know. I know painters, gutter guys etc. Any advice you guys?? I really want to make this happen!!
Quote:
On 2003-08-02 12:41, jarviscm wrote:
I do quite a few rehabs. Make sure your repairs estimates are good and then add 15% at least to that total. Be prepared for unexpected expenses. I act as GC and hire my own subs. I used to do all the work myself, but I can turn them alot quicker if I am just supervising the work. If you hire someone to do work, get everything in writing and NEVER, NEVER paid ahead. You always want the work done to your liking before paying anyone. It is also important to have your exit stratagy clearly defined. You need to know before you make the offer how to plan on selling. I always have a backup exit strategy. If I have problems selling quickly, I will refi and pull my cash out and rent or l/o. You want to make sure you will have positive cash flow it you go this route. I sure others will chime in with some other thoughts.
Wish I would have heard that advice last year?
I was naive and made the stupendously stupid decision to pay a carpenter prior to completion.
In the immortal words of Willie Nelson on a recent music video, "If a frog had wings, he wouldn't bump his <butt> when he landed".
Pinky:
1. Check your PPI (Property price Index) to see what other properties sold for in the same area.
2. Determine how long where properties listed.
3. Determine the Sale price of your prop after renovations.
4. Deduct all costs including your profit. That is your Max Purchase price.
5. Final decide if area, location & price is right. if yes
6. TAKE RISK - MAKE your 1st offer 5-10k below max Purchase price.
7. Go with offers until offer is accepted. Never exceed Max Purchase Price.
8 DO IT - AND STOP WORRYING!
[addsig]
I have to say that I agree and disagree with paying the contractor before completion.
I think that you should not pay them the "entire amount" prior to completion.
I generally receive 40%-50% up front before I will start work. Balance due upon completion. If we do any work for the local indian reservation then it is done100% in advance. Others I have done work for in the past I charge nothing until the job is completed and then bill them out.
I think it depends on the quality and level of contracting that you require. IF it is something that is less then 3-4k and requires minimal materials then I would not give much up front. If I am going to do a 50K remodel on your home with 25-35K in materials then you better "show me the money".
WItht his policy I am number 1 in my market and have work lined up months out in an area with 15-20% unemployment and one contractor for ever 56 people (first thing that happens in Oregon when the mills lay off is everyone becomes a contractor
[addsig]
As far as paying up front, what I typically do is ....
if the sub is purchasing material and not just providing labor, I will make a payment upfront. If their only providing labor, then I typically only pay when complete (or as large phases are completed)
--Mark