Help with rehab process and pulling the trigger on DEALS!

[Andres Ayala]

I am struggling pulling the trigger on deals. I keep running the numbers for a BRRR property and they seem to work, but since this is my first deal I become a bit hesitant on committing on a deal. I am struggling mostly with the Rehab work, I am getting deals from a wholesaler and the properties need a significant amount of work. Because I am not 100% familiar with the rehab process from start to finish and I work a full time job I feel as if I won't be able to fully control the outcome of the property. I am looking at rehabs around 40k-60k and walking a property that needs this much work just makes doubt creep in of how to make it work after. If I could get any advice on how to get more familiar with the scope of work needed for rehabs this size or what the procedure was, maybe shadowing somebody I would feel more comfortable in moving forward. I also had a vision of what I wanted to do but not sure how to present that to any contractors for accurate bids. Does anyone have any reccomendations on how to learn this process either people or materials I can research? I am in Austin, TX which the market here is going up like crazy.

I also wanted to ask if anyone has had trouble finding an ARV for a property in an appreciating market? Where I was looking at the properties were selling for 280-310k for 1,500+ SF 3BD 2B. They were not flips at all or renovated to an extent, most of these were in very nice condition but no full guts in this neighborhood. How can I estimate the ARV on a fully remodeled property if there are none to compare the updated house with?

Thanks in advance!

[Gil Segev]

@Andres Ayala I can definitely relate to your hesitation. I have had the same thoughts when reviewing deals. Other, more experienced investors may have a different view but here is mine: 

Unless you get an inspection period when you buy from the wholesaler (which hasn't been my experience), the best you can hope for is walking the property before buying it cash. As a first step, I would find an investor friendly contractor and explain your goals and that you will get to do a lot of business together if this works out. I'd then ask them to walk 2-3 wholesale (or even MLS!) properties with me and learn more about their thought process or even send me a bid for work. This should give you a high level understanding of the costs - is it 20k or is it 60k?

If this doesn't work or is not possible, I would consider starting with an MLS deal which offers an inspection period where you to get contractors bids in. If it doesn't work for BRRRR, you can flip the property or just back out of the contract.

One more thing to consider is the risk: let's say that you buy a 100k property and plan a 50k rehab on it for a 200k ARV and pulling out all of your 150k (0.75*200k) but in reality you end up investing 50% more (!) than planned in rehabbing. In this case, you are all in for 100+75=175k and still pull out only 150k which means you leave 25k in the property. You still get 25k in equity AND have positive cash flow. Still not a bad deal.. And you gain a lot of experience which will make your next deal that much better!

It's all about taking the first step! Good luck!