All Forum Posts by: Ritch Bonisa

@Jaron Walling Mapleton Fall Creek is great!  Been putting my money in there and I've ramped it up. 

This is normal for "back to school"  - retail drives it. Otherwise, there is also a moderate pricing correction.  It's a good thing.  From the investment point (not retail), too much greed.  It's a matter of those who sell, thinking they need to totally kill it on every deal.  It went on way too long and it's not a good business model for the long haul. Difference between the pretenders - the get rich quick people and the real business people.  My pipeline shows alot of positive for November, December, & January. For buyers like me, it's about evaluation. 

If someone is to be paid, I think it makes sense to require them to show you that they are involved.  This is good twofold - 1) If they can show you something, then you know you are getting something for your money.  2) They can provide you with valuable info. 

Have them be onsite 2 times per week minimum.  Get photos and progress notes.  Also require photos and progress notes from the contractor 2 times per week.  This way you get the contractor's take on it and you get your own boots on the ground opinion on it.   Absolutely, require an additional inspection from your boots on the ground before a draw payment.  You should already have a contract with your contractor (s), this would include phases of construction - who is doing what, a checklist of "to-do's".  Have your boots on the ground fill out the checklist and email.  

@Drew Y. I agree with @Patrick Liska. I think you need a structural engineer to tell you, especially at these price points.  A structural engineer might be able to give you and idea of cost, but I would get a report from them and develop a scope of work based on their report.  The only person that can give you true costs for the repairs will be a contractor who would actually do the work.  

If you have faith in the contractor, I would say this situation is more about appropriate scope of work, not necessarily the costs.  Get the scope first, then put costs to it and see if it makes sense then. 

Project Plan

You want to know the order of things happening.  You want this for several reasons.  #1 that there is not just a list of things that need to be done, there is a complete plan for project completion.  (the order of some things may change as work progresses - this always happens) BUT you want a plan for the rehab.

#2 You want the contractor to be efficient.  This is two-fold.  Yes, it gets your project completed faster.  The other thing is - the contractor needs to go in a certain order and make sure he is efficient so he can make money.  If he can't be efficient enough to make money - it will end up causing issues on the project.  Issues on the project are not good for staying on budget and hitting completion targets. 

@David Phillips Whatever you end up doing - know this - if you have the ability to evaluate realistic rehab costs prior to purchase of a property, then you have a very special skill that many others don't have. 

Investment disasters come from a few basic areas. Many times properties are purchased too high and rehab costs are not clearly understood. A good deal assessment involves understanding comps in the immediate area, and likely ARVs, reasonable investor return, holding costs, selling costs, and rehab costs needed to hit target ARV. When you know these factors, then you know what a reasonable purchase price for a distressed property is.

Way, way, way too many people think they are getting a good deal on a property and don't understand the full equation.  They buy too high and then try to force the rest of it to "fit".  It just doesn't work.  

The skills you have now are great.  I would suggest that you get a broker's license and learn how to pull numbers so you can be adept at putting together full and reasonable deal evaluations. 

@Andrew Hooper In reference to rehab costs.  I am a rehab consultant and a cost analyst.  I also oversee rehabs for other investors.  Many times I evaluate costs and deals prior to an investor making a purchase.  Investors also bring me projects to oversee after they've purchased a property.  Many many times I refuse to oversee the project specifically because the rehab budget is too tight and usually it is because someone purchased at too high a price because they took rehab cost advice from a seller. 

Some people sell or "move" real estate.  Just because they do that does not mean they have any clue regarding construction costs or the ABC's of structural rehab. When there is a 20k difference in a seller's projected costs and actual reality - there is a problem somewhere.  

I like to look at tight comps and ARVs. ARV is my target. Then look at current condition of property. The next question is - what is the scope of work it will take to reach the target ARV. What are the costs associated with that scope. What are selling costs, commissions, holding costs, etc. Then we add in what kind of a ROI is needed or at least a minimum necessary. At the end of the equation there is a clear range of what the actual property is worth in it's current state.

Many people can get the comps, evaluate some of the other costs.  I think the real key is being able to understand realistic rehab costs. 

I think my point is more of - learn how to evaluate rehab costs if you are marketing with rehab numbers.  I know a wholesaler that never markets with rehab numbers.  He said he got tired of getting it wrong and having backlash on it.  He moves 30 plus properties a month.  He's a good guy and a good wholesaler.  I think he viewed it as an ethical move to drop the rehab numbers in his marketing.  

There can be a huge chain of events that unfold when rehab costs are not understood from the beginning. As an investor, you can't really force a deal to work. When you try to squeeze the rehab down in order to hit your goals, there will be someone who gets the short end of the stick. When I look at the REI landscape, I always wish that more investors, players, and vendors would try to create win, win, win situations.

I spent many years coaching high school basketball.  I tend to view real estate in many of the same ways.  Evaluating costs is a lot like evaluating players.  Putting the pieces together on a deal is a lot like putting the right individuals together to create a team where the sum is greater than the parts. 

@Leroy Feireira-shearin They don't tell you that if you don't have a buyers list - you've got nothing.  

It makes sense to have multiple buyers in mind when you put something under contract.  My opinion:  If you don't have multiples in mind to purchase the property, don't get it under contract.  I know the best wholesaler in Indianapolis and he always has buyers in mind.  He's not wasting the seller's time.  He's honest and forthright about his approach. 

I don't do contract assignments myself.  I buy with cash and own properties.  I've also never made a single purchase through assignment.  

If you want to be ethical - don't market using potential rehab costs.  Only attach rehab costs if you have a fair to high knowledge of construction.  Also, use tight comps, don't fudge them or be deceptive.  

@Ondrej Marimar Will this be a rental property for you?  Are you planning on doing any rehab?  Getting any type of inspection?  Do you have a property manager? 

I'm very active in Indy, feel free to reach out if you'd like to discuss the market.

@Collin Savunen As I read through this thread, I saw something I wanted to address. Seems like you want to get a handle on evaluating rehab costs.

I'm going to comment on evaluating the overall deal, because people get killed on the purchase.  It's not usually the rehab that gets them, it's the purchase.   

I'm an investor, but I'm also a rehab consultant and cost analyst.  My partner is a construction specialist and a broker. 

Work it all backwards before you purchase. What are the comps on the property you are looking at. What type of ARV are you shooting for. What work needs to be done to reach your target ARV. This is what your scope of work will be.

Now we have to figure how much it will cost to complete the scope of work to get to the target ARV.

Then, how much return are you needing.

Holding costs and brokerage fees.

Work it backwards and you will know what you can afford to pay for the property.  If you can't get the purchase price down to where it needs to be - then you have to walk away. 

I see too many people purchasing too high and then trying to squeeze the rehab or contractors to force the deal to work.  It all adds up to disaster.  You can't MAKE A DEAL WORK.  

I saw this comment.  Taken out of context - it can cause problems. 

"Your scope of work is going to determine your rehab budget."

The scope of work needs to fit into your budget, and you can't MAKE it fit.  

One one end you have target ARV or even retail selling price. Other end is your purchase price. It is the "guts" of the evaluation that will tell you if you win or lose on it.

I'm sure there is nothing new or mind blowing in my comments. I talk REI with "newer" investors every day and even see veterans trying to force things to work out. I just think it's about basic fundamentals and not shooting from the hip and I take every opportunity to say it.

Take me with a grain of salt, but I just wanted to chime in and try to be helpful.

Best wishes!

@Christopher A Brown Absolutely.  I'd be happy to share what I know.  Hope I can be of help.