New investor needing rehab estimate advice

[Brian Garrett]

I have spent the past 6 months or so educating myself on REI as much as possible primarily here on BP by listening to countless podcasts, posting tons on the forums, analyzing hypothetical deals, networking with other investors, realtors, wholesalers, lenders, contractors, etc.  Now I'm ready to take action and start looking for my first deal.

I am focused primarily on properties that I can BRRRR and/or flip. Obviously both of these strategies require rehabbing the property to force appreciation. My main concern is that I don't have any construction background and I have never rehabbed a property before so I don't have any real world experience regarding the costs associated in doing so.

Once I find a deal that looks promising on paper and I physically go walk the property with my realtor how am I supposed to determine a rehab estimate without any prior experience?  This is one of the most crucial numbers for my deal analysis. 

I plan to have an inspection done and have several GC's come bid on the job after I have a property under contract but I'm stuck on how I'm going to properly analyze a deal before then in order to make an offer without knowing a realistic rehab budget.

I know once I do a few deals I'll learn the associated rehab costs pretty quickly and have a much better understanding but how would you suggest I proceed on my first deal or two?  I don't want to mistakenly low ball the rehab because that could ultimately turn my entire deal upside down.  I also don't want to overshoot the rehab because that could kill my numbers and make me lose deals.

Hopefully some of you experienced rehabbers can chime in with suggestions and advice!

[Bob Okenwa]

Most GCs won't come out to a property not under contract unless you compensate them for their time. Basically it comes down to "paying for education" in terms of getting GCs to a property not under contract and getting bids, or learning the costs on your own. Even without prior construction experience, it shouldn't take very long to pick up what's in J Scott's book. When I read the book, I first read through it for general information, then read it again and took notes on everything, then studied those notes like I had to be tested on the information. Did this for a few weeks and I felt very comfortable with analyzing rehabs. I was told by a person much smarter than myself that it's harder to learn something if you don't take notes. Since then, I take notes on every investing book I read and now have some pretty nice reference guides to fall back on.

Of course your experience with this will vary, but it is very attainable with the right amount of work and study. You'll get there eventually. It's all about repetition for me, but that may be a method that only works for me. Gotta find what works for you I suppose.