Newbie trying to understand the process!

[Angela Schroeder]

Hi! I am a newbie trying to understand the process of buying real estate and am hoping someone could shed some light on the experience from beginning to end! For instance, once you find a property you are wanting to purchase, when and how soon can you contact a contractor to check out the property and estimate rehab costs in order to give a more estimate offer? Do you have to contact the seller's real estate agent first and offer first? At what point should I apply for financing if I don't know how much I am going to offer or what the rehab will cost? Any insight would be much appreciated!! 

[Allan Smith]

It depends on your strategy. Are you buying off MLS? Going direct to seller? If you're doing your own marketing, are you going to wholesale off deals you don't want to keep?

I can't answer your question properly without knowing more, but I can give some rules of thumb. Your goal when making an offer on a property is to close on the deal at the terms you originally offered. That way you build a good reputation for yourself. In order to do that, you need to know the rehab cost before making an offer. That means you need to look at the property or have a contractor or two walk through it to give you a price on rehab. This doesn't really work with direct to seller, however, as no one will take you seriously have you rely that heavily on contractor bids. 

You might be thinking "that takes a lot of time and effort just to make an offer that will get rejected most of the time" and you'd be right. Experience gives people an advantage in the industry.

Best case scenario, you should be able to view a property within 8 business hours of hearing about it if it interests you. So for MLS property, as soon as it hits, you get there. Or if you are marketing and seller calls you, go look at it that day. As you walk through it, you should be able to write down what it needs, and have a pretty good idea, within 10%, of what it would cost to rehab. Later you can come up with rehab cost quicker and more intuitively.

If you require financing, you most certainly should be pre-qualified with your buying power before looking at any houses. Don't waste people's time, or yours. Chat with a couple hard money lenders first if you want to go that route.

I wait to start talking to lenders until after I've done my inspection, which is usually after putting it under contract. I don't change my terms with my seller unless it's sitting on a sink hole or something. I update my scope of work based on inspection, and pitch it to lenders.