Order of Operations

[Jewel B.]

One thing I'm currently struggling with is the order of operations.

• 1. Browse the market (MLS, Craigslist, Facebook marketplace) for potential properties, keep an eye and ear out for off-market (network)
• 2. Pull aside any properties that seem to have potential / fit buy box (2-4 unit for FHA househack and motivated sellers/distressed properties to HML BRRRR)
• 3. Evaluate the comps for ARV and potential rents
• 4. Schedule showings with realtor
• 5. Have contractors walk the property and bid / estimate rehab costs / quote
• 6. Submit an offer based on the ARV*70%-rehab costs rule of thumb (which accounts for the equity that will be left in the property after refi)
• 7. Speak with HML and see what they need from me
• 8. Offer rejected, accepted, negotiated, or ignored
• 8a. If rejected or ignored with no other buyer, follow up every week / regularly
• 8b. If another offer is accepted, monitor listing until sold to see if it goes back on market
• 8c. If accepted or successfully negotiated, due diligence (with possible negotiations), then close (or back out based on contingencies / unwillingness to negotiate)

Rehab/Contractors: Bid first then offer or offer first (based on some metric, such as % ARV) w/ contingency (such as inspection or approval of business partner) then bid and negotiate?

HML: Should I speaking to the HML at a different point in the process? Before and after offering?

I would love to hear your thoughts!

Thanks

[Mike Hasson]

 I like how thoroughly you think through! This looks like something I'd put together ❤️  lol

I'd make a few adjustments however. i agree with @Austen Mueller that speaking with the lender first is a good idea. I'd even go as far as lime up your refinance loan also, get all pre-approval, and learn about those costs and terms and bake them into your rehab plan from day 1. And that your realtor will be able to provide comps and ARVs, but unless they are also RE investors, I'd take their thoughts on repair budgets with a grain of salt. 

Some good interview questions for your realtor,  might include asking about how many rehabs they've done,  or how many rentals they own. You may be surprised at how many realtors don't understand the investing side,  even if theybare excellent realtors. Finding and negotiating homes for investments vs owner occupied, are completely different beasts, and finding an investor realtor will benefit you greatly.

AlWAYS do your own due diligence - trust but verify.

Then I'd switch 4 and 5. Sending contractors in before anything is under contract sounds like it will rack up tons extra cost (presumably you're paying the contractor for these bids on homes you dont even own?) and may put a strain on those relationships particularly if the homes never make it to contract. 

I would highly advise you to learn how to approximate rehab budgets on your own, which of course will take time and practice, and you may need to fork over the cash to pay contractors for bids to get that knowledge, but I would advise against keeping it as part of your long term strategy.

Thankfully BP has resources that can help! For me, a huge help getting started, was The Book on Estimating Rehab Costs by J Scott. 

There are probably some exceptions, like if you have exclusive or in-house contractors on payroll (most newbies probably dont), or if you're an out of state investor and your contractor is also your property manager, for example.

Also make sure you fully trust your contractor if you are depending on them for your budget and scope of work. I believe that a vast majority are honest, but there's something to be said about bringing in an inspector who is unbiased and not incentivesed by the scope of work.

What I recommend is to hand the inspection report to the contractor and work out scope of work from that, but you will need to be under contract to get that inspection.

However plenty of investors do just fine with no inspection and bringing in the contractor from day 1, but these are likely the seasoned pros and have excellent relationships with their contractors.

In any case, it seems like you have a good overall handle of the steps invovled.