Bought First Property - now what?

Question

I just closed on my first buy and hold property. $35k cash for a 4 Bed, 2 bath that I think would easily command $1,000/mo. post-rehab (9+% cap). I plan to budget about $20-$30k for rehab... updating kitchen, bathrooms, flooring, and paint. My question is, when contacting a GC, how should I prepare. Should I get pictures of finishes, materials etc. that I would want or just tell him I plan to make it a rental and just put install the nice things he would suggest and get estimate based on that? I obviously don't want to tell him my budget, or do I? Any help or advice would be appreciated! Thanks in advance!

Adam Abdel-Hafez · Answer

DJay Harrell I am assuming you have no experience with rehabbing a house. You need to be the one to determine the contractors scope of work of what the contractor will be doing and you need to be the one that chooses finishes (tile, countertops, vanities, etc). Never let the contractor decide these things unless you have worked with them before or referred and they do this regularly. I create the scope of work, etc for investors all the time on my rehabs, actually I do that most of the time but that's because I know what does and does not need to be done which most contractors won't know. You also want to make sure that you buy finishes, if you let the contractor do it it will be some cheap knock off or not even what you wanted. Once you have the scope of work, go get 3 quotes or so from different contractors and compare their price and overall professionalism. Don't mention the price unless they are all over your budget and then you can talk to them to see how you can get it down.

Adam Abdel-Hafez · Answer

I would have to agree with Brian Garrett , when I started out I had very little construction experience. I came from an engineering background, so I had no idea how to create a scope of work. I had a mentor that assisted me on doing all of this, whom now is my business partner. You need to find somebody to help you and that can't be a contractor bidding on your project

Brian Pulaski · Answer

@DJay Harrell if you own the home, now is the time to get a very detailed scope of work together. Walk the house and note everything you want/expect to be completed. I like to use an excel sheet to create a line describing the work, and a spot for the contractor to check off that he has included it. Be detailed/complete, but keep in mind not to go overboard. Use either an item you want (I.E.: tell him what vanity) or give him an allowance to carry (I.E.: "Carry $150 for 24" wide vanity with top to be chosen later"). Writing up scope of works can be fun, and then you can utilize the first one on the next property as a baseline.

Brian Garrett · Answer

@Ryan Swift Yeah I stop by the one he's currently doing every time I'm down in his area. He lives about 45 minutes away so it's not like I'm there daily but I do plan on picking his brain and having him help me as much as he's willing to on my first deal.

Ryan Swift · Answer

If you have a friend that does flips I would take time to shadow them on a project. Offer to help out where you can. Real world education like that is invaluable.

Brian Garrett · Answer

I have some realtor friends and a friend who does flips so I can ask them for advice however they won't be able to hold my hand through the whole process from start to finish. I guess I'm going to have to rely on my contractor at the beginning to help me with design and cosmetic rehab decisions and just learn as I go. I'll also ask opinions on here once I have my first property as well.

Ryan Swift · Answer

I agree with having a scope of work. Any major work I type up a simple page and print it out for the contractor to sign. Trying to be as detailed as possible so there aren't any surprises. Include payment terms and completion date. Do you know any friends or relatives that may offer some advise on what repairs needed. You could also reach out to a property manager or realtor for advice on what fits your market.

Brian Pulaski · Answer

Hard for me to relate as I have been involved in Architecture/Construction most of my life, so it comes second nature. If you don't know what a house needs, who are you going to ask? How are you going to oversee a rehab if you don't know what a house needs to be fixed up and rented/sold? Try and find someone you know to help, or a mentor. Asking a contractor can be hit or miss. They may see your lack of knowledge as a way to take advantage of you.Doesn't the BP books have sample SOWs you can use as a basis? Give one a shot and see if you can't find someone to review and give you some assistance.

Brian Garrett · Answer

How would one write up a work of scope if they have never rehabbed a property before? I don't think I would have the ability to do that and/or pick finishes, materials, etc. I believe that will come with experience and knowledge but to start I won't have a clue. What do you suggest?