Rehab process and due diligence for BRRRR and flips

[Jack Wang]

I'm quite new to real estate investing, and I have 0 experience with remodeling. In fact, I'm clueless when it comes to the ins and outs of construction, so I'm planning on relying on general contractors for my future projects. I'm perfectly fine with paying more than an investor who is super dialed in and babysits his contractors. I'd prefer to stick with what I'm good at, and that's the numbers and the financing.

I'm currently thinking through what my process would be when I identify a property that could make for an interesting BRRRR or flip. So far, this is what I'm thinking of doing after finding a lead:

1) run preliminary numbers to see if the deal could make sense and what rental strategy to pursue or a flip if BRRRR doesn't make sense

2) do a walkthrough with someone who knows construction (I'm considering paying a retired general contractor to accompany me on these walkthroughs to give me a rough sense of what I'd need done and costs)

3) make an offer

4) hire an inspector to do a formal inspection

5) negotiate further

6) offer accepted

7) get bids from general contractors

8) close

Does this seem like a reasonable approach? I'm just trying to visualize what the process could look like. What would you recommend a newbie with basically 0 knowledge of construction? Please do let me know if my above process is dumb and how I can improve it.

I'm having a ton of trouble finding a good general contractor. It seems like many contractors have large backlogs, too, which only further complicates the process. I've seen more dated recommendations for investors to ask 3 contractors to walk the property with them before even making an offer, and that just doesn't sound realistic at all from where I'm standing.

[Andy Sabisch]

We see these posts on a regular basis.  The problem is good contractors have little time to invest in first time investors that need a quote to make a bid that may or may not get accepted.  They are doing projects that are paying the crews salary.  If you do not have the experience to make an estimate on rehab costs and then add a contingency of 15%, you need to get that experience or have a partner that does.  Hiring a retired contractor (a recent retiree) will be a better option and one that can work on a tight schedule to view and place an offer than hoping to get a contractor to come over hoping to get a job if you get an accepted contract.  If you have a REIG in the area, join and see if you can get together with others that will show you the property, explain what they had to put into the reno and get a feel for local costs.  Our last few properties were bought with a 30 minutes walk through, a clipboard and a camera.  We had the offer drafted up a few hours later and the property locked up the next day.  Other investors were also looking at the property in one case and I knew him . . . he was waiting to get a contractor to look at it as it was his first investment property . . . the contractor never saw it as we had it under contract with a solid reno estimate well before that occurred.

Contractor time is valuable and expecting them to look at multiple properties for nothing before you have an accepted contract is wishful thinking.  Your option of hiring a retired contractor is by far a more plausible scenario to help you make an informed decision