All Forum Posts by: Matthew Williamson

What cost per sq. ft. are you thinking you can build these for? How many stories and bed/bath configuration? Your cost estimate seems low to me.

Total newbie here, but @Jared Anderson isn't this commonly referred to as an "option" period? Like a 7, 10, or 14-day option period that you pay a small, non-refundable fee for (usually like $100 for SFH in my experience) when you submit the contract. And with that option period you get all inspections taken care of and you can back out of the contract for any reason as long as it's within that window of time. Even if the inspections come back great you can still exit the contract. I've heard of 30 and 90 day option period windows too. Some people make a bunch of offers at once, get a bunch of houses under contract, and use the option period to dwindle their list to only the options they want to buy or can afford, and exit the contract on the rest of them. All you will lose is your option fee. Again, a total newbie here who only has experience buying long term SFH for my primary residence.

You're right @David M., I would want to gut it. I think that is just going to have to be my strategy. And I'll need to factor in that gut renovation price when making an offer.

Thanks @Andrew Postell, your answer makes total sense. I just need to make sure I am factoring in the cost of repair into the price I am willing to pay for the home. In my case, I think the cost to repair might be higher than other investors (meaning I would fix it up better/nicer than most people), so perhaps I will be less competitive. But that is okay if it means avoiding a money-losing situation.

Thanks @David M. for your response. I liked the "sometimes you need to work with whatever you find" thought you added. That is a mental block I need to get past, my inclination is to demo the whole house and build a pristine new home, but of course that is a lot lower return than rehabbing a property to the point of just "good enough" and moving on.

If my goal is to hold a property for a long period of time (potentially passing to heirs), I would want to do the best possible renovation I could to help avoid long-term maintenance issues. My thinking is to take care of all the structural and MEP/infrastructure work all at one time, avoiding costly future repairs and potential missed rent opportunities. And I don't just mean repairing what's obviously broken. For example, if I found mold in one part of the house, I would want to destructively search other parts of the house. If I saw an undersized header in one load-bearing wall, I would want to open up and check all load-bearing walls, etc.

This type of renovation would add a lot of time, and have high associated carrying costs. I probably wouldn't be competitive when bidding for these properties. It would be way overbuilt for the neighborhood if the goal was simply to re-sell the property at a later time. Taking this to the extreme, I would just tear down the existing building and start from scratch, being sure to build it to my (read: highest) standards. 

I definitely see the downsides to this approach, but I can't convince myself to just put "lipstick on a pig" and do it a cheaper way. Has anyone else faced this dilemma? Best practice construction sites like FineHomebuilding and GreenBuildingAdvisor have been a curse for my real estate investing efforts ;)

- Matthew in Texas