Getting Educated on Rehabs

[Andrew Lake]

I’ve made a few offers on multiunit properties in Chicago that I would be house hacking but haven’t had any luck on getting an offer accepted yet. With my current financing, finding deals that work for me in areas I’d want to live in where the numbers work and minimal/no rehab is necessary has been difficult and getting an offer accepted has proven to be even more difficult. I plan to continue this search but I want to start to broaden my search/strategy in the long term as an investor.

How can I start to become familiar with estimating rehab costs on a deal? With a limited budget and no experience yet, what are the best ways to obtain the financing necessary for a deal that involves rehabs? How can I (confidently) predict ARV on a property once I've come up with a list of rehabs and costs?

Thanks in advance!

[John Warren]

@Andrew Lake sorry to hear about the tough time. This has been a very low inventory year which has not made it easy for house hackers. Combine that with the 5% down conventional going away and it is just a tough year to land a deal unless you have 25% down. If you are patient you will eventually find a good one. I am encouraging all my clients to think long term and focus on high quality buildings. Make sure you don't settle for a junker that looks good in a spread sheet!

As for your rehabbing question, this is where your team makes all the difference. Calculating the ARV shouldn't be too challenging, but getting a detailed SOW on the front end can be tough. You have to have that experience. I did a flip three years ago where I made almost zero money, but I got my degree in rehabbing! I went 50k over budget and learned a LOT.

Even if you look to do renovations, make sure you try to stay cosmetic (changing cabinets, gutting bathrooms, floors, paint, etc). If you can avoid major plumbing and electrical or removing walls then you will do a better job at estimating costs. Lastly, connect with a great GC if you can. This can be tricky at the front end of your journey though as they try to avoid newbies.