All Forum Posts by: Antonio Rivas

@Antonio Rivas yup, these are very good questions. Knowing how to calculate rehab is one of those critical skills you need to successfully do a BRRRR transaction - it's just not talked about in detail very much. Now, I did my first few properties without knowing the rehab...but I specifically targeted lower valued homes so that way if I made a mistake then the mistake would be low. So maybe just target homes with lower rehab costs in the beginning? Some other solutions would be to partner with someone who knows what they are doing. Or talk to your contractor to see if they can give you any pointers on how to do it. The last one assumes that you have a contractor - so if you don't, get one.

And yes, you should 100% get prequalified.  How do you know what you can get unless you are prequalified?  What if you can't get prequalified for that much?  it might affect your offer.  Or what if you can get prequalified for more than you thought?  That means you can be more aggressive with your offer.  So your prequalification might help tell you what your offer needs to look like.

Also, visit your local REI groups. There are many groups that meet across the country. Some post here on the Bigger Pockets Marketplace. Many post on meetup.com. Even facebook will have some. Usually they will provide a "how to calculate rehab" class every once in a while. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you.

BRRRR SKILLS NEEDED

Generally speaking you will need several things to successfully complete a BRRRR:

1. ARV - being able to calculate the Value on your own (meaning, without the wholesaler telling you the value) is really important.
2. Repairs - You will likely need to know how to budget the repairs as well. Getting a contractor can be extremely frustrating especially if you need to make an offer without even looking at the property. How do you calculate repairs without a contractor? You may need to lean on other local real estate investors in the beginning. Or maybe even just focus on properties with a very light rehab?
3. Lenders - You will need a lender on your BUY step and on your REFINANCE step. And I would HIGHLY recommend to read this article I wrote for Bigger Pockets on how to find good lenders that you can find HERE. If they are good, they should be absolutely definitive on rate, terms, costs, etc. Trust me, many lenders will tell you they can do this...but it's very rare to find. When I first started BRRRR'ing my properties lenders would tell me "That's illegal"....it's not, they just didn't know anything about it.
4. Finding Properties - and this is the absolute hardest step of anything right now. So network like crazy and find some good resources. It's going to be hard...but if it were easy then anyone could do it.

@Antonio Rivas

Yes, learning about estimating the cost of the rehab is a chicken and egg proposition..   You can't get vendors to estimate a job until there is a job to see...  But, if you don't have a deal, you can't estimate it and so you can't figure out what to offer..  One way would be to line up the major trades, or the G/C if you have one, before you make the offer.  Of course, the issue will be timing.  Much of it is experience and good "guestimating."  You might have a few false starts.  Not sure where you are looking or how your market works, but you could put an offer on the property and get your estimates in during your due diligence.  If something flags, then you get out via the inspection clause.  its not nice to the seller, but its a pretty standard investor move...

OF COURSE you need to speak with a lender before your purchase.  You need to have your financing all lined up before you start the search.  You need to know your budgets / financing for the acquisition, rehab, and exit strategy.

Were you planning on purchasing your potential property in cash?  That's not as bad.  If you were going to do it with a loan, how would you get a lender to get funding for the rehab later?  Any "decent" lender will want collateral for the loan which would be the property.  But, if you've already encumbered it, you'll have to get money from the "second lender" to extinguish the first loan so that the "second lender" can take the 1st position lien.  If you do that, I hope the purchase loan wasn't conforming as your lender will get hit with the pre-payment penalties and your loan officer will lose their commission on that --- they will probably never work with you again.

Its too bad...  There is so much out there be it on BP or youtube/podcasts/whatever about finding that deal.  But, you really need to figure out what you can afford and how before you go "shopping."

Good luck.