Please Help Me with my Fixer-Upper Anxiety

[Joshua McGowan]

First time investor here.  Been listening to podcasts and running numbers on potential "deals".  I feel confident in my ability to crunch the numbers if I have accurate inputs, but less confident in my ability to estimate my inputs.

I'm sure that this comes as a surprise to no one, but I'm finding that in order to get my desired rate of return on a buy and hold rental property, I'll probably have to buy something that needs a good bit of work.  However, I'm very nervous to take the plunge and put large sums of money into what, at least for me, is a very uncertain venture.  How do I build my team?  What if my rehab budget is off?  How the heck do I even estimate the budget that a run-down property will require??  What if the project takes forever and I'm stuck paying taxes and mortgage on a property that I can't rent???

I'd love to hear from some people who were in my shoes and have come out the other side.  People who were dying to get into the fix and rent or flip game, but scared of getting in over their heads by risking years of savings against something they'd never done before.  

What were your first steps?  How did you build the team you needed?  How did you reach the point where you were confident enough to take the plunge?  What went well?  What went poorly?  Where are you now?  I'd love to hear your stories and advice.

[Bob Woelfel]

@Joshua McGowan...i was in your shoes about 5 years ago. I offered on a couple properties on the MLS and fortunately or unfortunately my offer was accepted on BOTH of them in the same week. So now I had two projects instead of one and a lot of money in play. The advantages I had that helped me where that I did a live in flip a few years prior so I did have some experience, but that was in a completely different city. I spent a TON of time at Home Depot and Lowe's getting very familiar with prices of materials. If you are nervous about rehab costs I highly recommend doing this. That way you can work backwards on everything. If you are wondering what it will cost to tile a floor just take the sq. ft. of the floor and figure out your material costs and then use a conservative number for your tile person for labor. You won't be super accurate, but with where you are in the process short of getting actual bids this is one of the best ways of getting estimates.

Depending on how you finance the purchase and repairs you will need to have some cash left over for overages, holding costs month to month, etc.  You don't want to get to month 3 and be out of money.  If you have this cushion then you should be able to withstand whatever happens and make it out on the other side with a renovated property and a new tenant.  Because you are new I would recommend budgeting at least 10% of misc overages because I'm 99% sure you will go over budget.  I would also recommend adding on a month or two to how long you think this is going to take.  It ALWAYS takes longer than you think.   The best way to build your team is to get recommendations from other investors.  Go to investing club meetings and talk to people about who they use.  It's a process man.  You won't have all the answers right away and you never will.  You just have to get close enough to the answer to know that you'll be able to figure it out as you go along.  Best of luck.