First Rehab. Cincinnati Tri-Level

[Brian Cooke]

Probably should have started this earlier. I’m a few weeks in, but I’ll split the post up so that it flows a bit better than a giant long read.

Been getting all sorts of RE education through biggerpockets and my local REIA for a couple years. Last year I spent basically the whole year trying to find a deal. Finally bought a rental at the end of the year, turnkey. Then almost immediately found a good deal for a rehab project. I figured I had enough money to finance a rehab project for a quick return. Purchased at the beginning of this month.

The deal:

3 bed 1.5 bath tri-level home. Asking price 70k. ARV: hope for 130k, expect more like 125k.

Rehab is all cosmetic, plus new HVAC and A/C.

• Redo the kitchen, leaving the floor.
• Remove dividing wall between dining room and main room.
• Remove carpet, refinish all hardwood floors.
• Expand half bath into the neighboring closet to make a full bath. (The full bath was in the master bedroom, so the two other bedroom's occupants would have to go through the master to go take a shower)
• Replace all doors, lights.
• Paint interior

Estimated cost 30k. Using MAO 70% - rehab formula. MAO is 57k, which wouldn't get accepted, based on talking to the realtor. Ended up offering 64k, which gives me a good chance of still making a decent profit for a first flip.

They accepted the offer.

Next post about the financing aspect.

Photos here Google Photos

[Dean I.]

@Brian Cooke

I am sure that you already thought of this, but in the future you may want to considering finding a contractor or two to go out and look at the houses before you put in an offer. If this contractor works out well for you, he may be your guy to do this.

With that being said, obviously, want to to do as much as you can to eliminate any properties that obviously will not be profitable before you go dragging your contractors around to every distressed property you find.

One thing I did when I first got started was ask a contractor to come out to see 5 or 6 properties and price out the rehab. I asked him all kinds of questions and I tried to get an idea as to how much rehabs would cost based on the numbers he was giving me. I then paid him for his time and I was now better equipped to look at properties and determine if they were worth even bringing him out.

If you go this route, let him know your intentions. Tell him you want to take him to a handful of distressed properties and get some prices so that you don't end up wasting his time in the future. Tell him that you want to pay him for his time on this trip and ask him what he feels would be fair. 

Generally speaking, as long as you are giving the contractor work, they should not mind doing a few free estimates. That said, if you keep asking him to price out houses that you never close on or even put an offer on, he will likely stop working with you, so learn what you can as quickly as you can and eliminate what you can before you call him.

Also, other than what I suggested above, I would not pay a contractor for estimates unless that is a common practice in that area. When I was a contractor, I would often times bid on a dozen jobs before getting one and I never charged a dime. It was the cost of doing business.