NEWBIE WALKING PROPERTIES W/ CONTRACTORS

[Courtney Rollins]

Hi all,

I'm a newbie to REI and am looking to buy and hold distressed single family and small multi unit properties on specific blocks in the Baltimore area. I plan to finance using savings and hard money before refinancing into a traditional loan. As I attempt to estimate rehab cost and create a scope of work for myself and for the hml applications, I need to have contractors visit the potential properties because...I have NO idea how to confidently estimate repairs, and recently purchased books on the topic. However, book knowledge and real life application are two different things. My question is does it normally cost to have contractors walk a property with you to determine a SOW to submit to hml's and other lenders? Is this a regular practice? Also, how do you prepare to be efficient with your contractors and others time? I recently visited a property with my realtor and a developer, but was ill prepared to ask the right questions and didn't properly document what needs to be done on the property. I am going to ask another contractor to visit the same property but this time I am bringing with me template of a SOW I picked up online and will take notes to try and determine rehab cost. I hope I am better prepared this time and I hope I don't drive my realtor crazy visiting the same property again. So much to learn! Thanks for any support all!

[Patricia Steiner]

Courtney, are you using a realtor who is experienced with investment properties?  Who chose the "developer?" (Was he/she really a "developer?")  What was the goal of the walk-through?  Who ran the walk?

Your realtor should have better prepared everyone for the "walk-through."  And, it's not a walk-through - it's an inspection, planning meeting, and risk-reward analysis.  Not only do you need to have a detailed accounting of its current condition, needed repairs, code violations, cost of rehab, photos, timeline - you need to vet the contractor(s): do they have insurance? references? done this work before?  A really great way to get ripped off is to show-up with a contractor and prove that you have no idea what you're doing...

Hold your realtor to a higher standard.  You need bench strength here - not sales people. Spend a lot of time BEFORE you go back to the property on defining goals.  Do your search of code enforcement BEFORE you go to see if there are any violations already cited.  Vet the contractor BEFORE you go...for example, has he/she done this type of project before.  Know your financing hurdles (how are you going to pay for the property AND the improvements).  

I so admire you for laying your cards on the table and seeking advice.  More people fail at real estate investing than succeed because they think they can "learn as they go."  It doesn't work that way.  Slow it down, plan upfront, have the right people on your team (they should know more and have more experience than you...or they're adding weight to the load - not helping lift it), and have the financing/money arranged.  It isn't HGTV...it's a business.