Defining Rehab

[Kevin Edwards]

I live in the San Fransisco bay area and was just talking with a friend who is on his fifth house-hacking flip. I'm new to real estate investing and I'm trying to figure out if I can afford to "learn" to flip in a market where a 2/2 is $1M. My friend said after his fifth flip he has learn that the best way to go is to rip the entire house down the studs (or more). Every time he starts a rehab it grows and grows. He also said that the market demands very high quality work, trim and appliances. I asked if there was a way to rehab in as little as a month and he replied only if you are painting. His projects take 8-12months with contractors. Yikes! Everything I had been reading up to this point led me to believe a rehab was to fix the broken things, paint, and maybe redo an out dated kitchen or bath. Speaking with a kitchen and bath contractor in the area and he said a bath rehab is $15-30K minimum. 

So, is a rehab in the eye of the beholder? Does it vary depending on the market? Would I be looking at $100K-250+K rehabs in my area?

[Gino Barbaro]

@Kevin Edwards

Hi Kevin

This seems like an inordinate amount of risk.   He has money out for an entire year, carry costs?  When the market turns, and it will, your friend is going to be holding a house he can't sell. The definition of rehab to me is to heal, not to completely rip apart and start over.

Gino