All Forum Posts by: Kyle B.

Hey all,

I was hoping to get some thoughts from experienced investors (rehabbers in particular) about what steps helped them take their business to the "next level" so to speak. I've been rehabbing for a little over a year now and have started out pretty well. Right now though, my time is split between looking for a place to flip, and then once I find one, I switch over to almost exclusively managing the rehab process and taking on quite a bit of the work myself. Once the rehab is finished, I switch over to finding a new house mode. That leaves me with the problem of having a gap in time between each flip, whereas my goal is to have at least one project going on at all times. I know I need to focus more of my time on finding properties to purchase, but I feel like I need to spent a lot of my own time at each rehab in order to get the job done efficiently and to a high quality standard (I know hiring a general contractor seems like a simple answer to this, but I've found it much more expensive to do this than sub out the work myself).

Not really look for a solution to this, but thought it would be helpful to hear from others how they were able to overcome this or other similar hurdles in their business as they were in the early stages. What actions did you take to really streamline your business? Was it spending a lot of time finding the right people to hire / being more hand off on the rehab and focusing more on lead generation. Really interested in hearing people's insights or any anecdotes in general.

Thanks!

Kyle

Dannielle, I would say your estimates for kitchen and bathroom are high. I flip in northwest Indiana in about that price range and spend under these amounts. I would say around $8k for kitchen and $3k for bathroom. Here is a breakout of my projected costs on a new flip I'm working on that might help you price things out (a little higher end than I normally do, so above the figures I posted above). Keep in mind, cabinetry can get very expensive but you'd be surprised at how nice some affordable cabinets look.

Kitchen:

- cabinets for decent sized L kitchen with 6 ft island - $2,500 plus $800 to install. I don't add hardware

- granite counter tops - I try to find something in the mid-$40 per sq ft range. Typically ask them what slabs they are trying to get rid of or can offer me a good price on. Haven't priced it out yet but I will probably pay between $2-$2.5k

- sink $200, - faucet - $200,

- backsplash $300 install, another $300 materials

- I usually add canned lights in kitchen ~$80 per,

- Flooring: If tile, I buy the $1 per sq ft ceramic so materials are cheap ($150), labor for that may be about $1k for a decent sized kitchen / If I do engineered wood, then about $2.50 per sq ft for materials and $2-$2.25 for installation

- Appliances: about $1k, I don't provide fridge, just dishwasher, stove, microwave

- Plumbing hook up - ~$250

Bathroom:

- I have had to demo walls before due to tile, so probably $300-$400 for new drywall if that is the case

- Tile shower - probably around $250 for materials and $750 for labor (including cement board installation). Again, tile is cheap $1 ceramic although I usually put mosaic accent wall in middle of shower (this tile is about $10 ft per sq ft)

- Tile floor - $400 installation, $75 materials

- Vanity: $500-$600 (can get cheaper though), faucet $120

- toilet $150

- tub refinishing $375, or new tub $650 (tub and installation)

- shower/tub trim: $150

- plumbing hook up $250

Hope this gives you a good idea of costs. Make sure to get multiple quotes from people and make sure they know you are an investor. You will find that there is a wide range of prices you will get, especially from contractors that are used to more high end properties.

@Ryan Billingsley  do you know a real estate agent that can do this for you? I would suggest you look into finding one that can do this for you until you get your own license. You will just need to figure out how to incentivize them to do this for you.

When I need comps for an off market property where no realtors will be involved if I end up purchasing the property, I have my realtor provide me comps because she knows I will list the property with her when I'm ready to sell the home. I also suggest her as an agent to leads that end up not wanting to sell to me specifically. So it is a win / win for the both of us.

@Jamie Wooley   my parents invest in my flips as well. I pay them 10% annualized on the money I borrow from them. One thing to consider is does your father want to lend you the money or does he want an equity interest in the deal. If he would prefer equity, then he would be taking on more risk and hence should have a larger share of the profits.

@Gayla Kemp 

I suppose the logic behind renting is that you would be more liquid and have that much more money to invest. Of course, many people are not sure of where they want to be long term or simply want to have the option of being mobile, so renting would be a smart option in this case as well.

Personally I own my home, not because I think it is a good investment but simply because my wife and I enjoy living in a nice house. It simply comes down to our preferences. Others may prefer to spend all their money on investments because that's how they like spending their money.

@Raj Gandhi  interesting points. I would add that the most successful people (in purely monetary terms) are a blend of your last two points - investors own money and others. Think about the richest people in the world - they are business owners, primarily of public companies. So Warren Buffet for example has sizable wealth that he invests for himself, but he isn't the sole owner of Berkshire Hathaway. He also is responsible for investing shareholders money. Same goes for Bill Gates (at least when he was still day to day with Microsoft) - retains sizable equity in company but still majority controlled by public shares. 

In terms of brain<money, I would categorize money as risk instead. So an engineer is using his brain, but he/she could use their money to start their own company (essentially managing their own money through a business), thereby taking on risk that they didn't have as an employee.

@Gwendolyn Davis from my experience, it is common for the bank to ask for proof of funds when submitting an offer on an REO properties.

I will tell you that it is very difficult to wholesale a bank owned property. The primary reason being is that it is listed on the MLS, so pretty much every investor interested in purchasing the property knows about it already. The value a wholesaler adds is offering off-market properties to investors (properties that are not being readily advertised as "for sale").

In theory, you could get the property under contract and offer it to an investor at a slightly higher price. But chances are the investor has already seen this property (because it was listed on the MLS). So they were not able to purchase it at a low enough price. Assuming that is the case, you have the property under contract at a higher price than the investor is was willing to pay and now are offering it to them for this price plus extra (for your wholesale fee). They'd be hard pressed to purchase it from you when they already passed on it at a lower price. Hopefully this makes sense.

I can think of one instance where a REO was successfully wholesaled. A friend of mine put in a bid on a property immediately after it was listed, sight unseen (so like within minutes of of coming up) and the bank accepted immediately. The offer was at a low enough price so he was able to wholesale it for a $5,000 fee. What really happened here though was poor management/marketing by the bank. What the bank should have done (and usually does in 99% of situations) is allow multiple bids to flow in and then make everyone give their best and highest offer. This would have forced investors to bid up the price, essentially forcing out anyone trying to wholesale the deal.

I rambled on a bit more than I wanted to. If you take one thing away from my post, it should be that successful wholesalers find Off-Market properties to bring to rehabbers/landlords.

Kyle

@Samantha Lotti  sounds like complete BS to me. What does having a license have to do with how many properties one is allowed to purchase? Maybe it is possible she was referring to something else or misunderstood your question.

@Michelle Joiner, no need to over think your response. I would suggest being brief and to the point. Let them know that you will need to inspect the inside of the property before making an offer. If they don't let you do this, then they really are not a motivated seller. 

In terms of making the first offer, I don't see this as a big deal. A lot of the times they insist you make the first offer. I usual preface it by saying I'm basing it on my repairs estimates and a profit margin for myself then provide them the offer (essentially letting them know I'm not trying to low ball, simply a numbers game). I don't need to get them at their lowest price. I just need to purchase it at a price that will give me my desired rate of return, if they want higher than that, I simply walk away from the deal. 

Also, I would suggest not patronizing them about the deceased or that it has been in their family... they know you are trying to make money and they want to sell it as well.

Hope this helps.

Kyle

@Jessica H., awesome! Wish my house looked that nice, haha. Given the extent of work, how long did the rehab take and did you use a general contractor? Those are some pretty great results given it was your first flip.

Kyle