Not Doing The Rehab Yourself
I was just wondering from the folks who frequent this forum, how many of you are not doing the work yourself...
I have a friend that recently doubled the size of her house with no exp. acting as the GC, and keeping tabs on all the contractors. I have overseen tennant build-out and such for business in the past, and I think I could pick-up the business side of it pretty quickly, so...
Anybody out there picking up the ugly ones for the margins, then subbing out all the work? I'd appreciate hearing your approach, method of finance, criteria, and any particulars on dealing with the contractors.
Thanks.
Robbin Thomas, the self styled queen of rehab does exactly that
[addsig]
Look at it this way...
If you do your up-front analysis correctly, all you need is two simultaneous rehabs where you're the GC to realize a huge profit over doing them with your own sweat.
Sure... I know there's people doing this... I'm just trying to get some idea of how many folks are pulling this off without a background in construction, etc.
Obviously there's a learning curve, and clearly having spent time on job-sites is a benefit...
Anybody that's not coming from that sort of background have any words of wisdom for an easier segment of the rehab industry to learn first, or where and how one should go about learning the most important first few steps while making some money in the process?
I am getting my feet wet on this also and I have very little experience with building trades. Most of the time I have someone else supervising the work since most of my properties are far from where I live. Sometimes I have orchestrated and overseen different "subs" on minor rehabs ($5000 or less).
My biggest problem so far is that people tend to underestimate completion dates. Usually, I have plenty of padding, but my most recent episode with a major rehab took twice the estimated time.
I have used my own money for everything so far. That might change soon and I will probably use a Home Equity Line Of Credit (HELOC) for future larger projects. The interest rates are very low.
I usually get recommendations from people who know the contractor or ask to see samples of their work before hiring them. I usually will not pay them anything up front. If they want to be paid before the job is complete, I have them break the work up into segments with milestones and pay after inspection after the milestone has been met.
Sometimes they will not have money to buy materials up front. I make arrangements with their suppliers so that I pay directly for materials rather that give them the money. This way I know the money is going where it is suppose to.
I hope that this is of some help.
Regards,
Ed
I'm not sure how the laws are where you are, but here in MI if the home is not you primary residence then you need to be a licensed builder to rehab the home legally. You might want to check your local laws. Building is not as simple as people would like to think and often the person without experience can cost themselves more money than if they were to just hire a good GC. For instances, I have a client I am dealing with now that was thinking of building here own home. I looked the print over, made some suggestions and just cut the cost of her home by $15,000 by making a few minor changes and this is just the begining. Experience pays for itself. I am not saying it can't be done by the inexperienced, just be careful. Good luck.
Quote:
On 2004-05-20 16:49, thestudentisready wrote:
I was just wondering from the folks who frequent this forum, how many of you are not doing the work yourself...
I have a friend that recently doubled the size of her house with no exp. acting as the GC, and keeping tabs on all the contractors. I have overseen tennant build-out and such for business in the past, and I think I could pick-up the business side of it pretty quickly, so...
Anybody out there picking up the ugly ones for the margins, then subbing out all the work? I'd appreciate hearing your approach, method of finance, criteria, and any particulars on dealing with the contractors.
Thanks.
I think people are confusing rehab with new construction. Two COMPLETELY different creatures. The problem with hiring a Contractor, is finding a good one. A good one will make you money, a bad one will cost you MUCH money. And, it's difficult to tell the two apart. Get references, look at some of their work, then take a chance. Here in Ga, there's no such thing as a GC license, so any Joe-Blow on the street can tell you they are one, you just gotta be careful. I've YET to find a good one, and intend to start my own co. hiring people and managing it myself jus as soon as it's feasible.
Wow! No licensing requirements huh? There's a scary thought. Of course, here in Michigan anyone can obtain a license by taking the test, so I guess it's not a whole lot different. I think you should have to have at least 5 years of trade experience before being able to obtain a builders' license but I guess our state sees things differently*L*
Quote:
On 2004-05-22 17:48, jam200 wrote:
I think people are confusing rehab with new construction. Two COMPLETELY different creatures. The problem with hiring a Contractor, is finding a good one. A good one will make you money, a bad one will cost you MUCH money. And, it's difficult to tell the two apart. Get references, look at some of their work, then take a chance. Here in Ga, there's no such thing as a GC license, so any Joe-Blow on the street can tell you they are one, you just gotta be careful. I've YET to find a good one, and intend to start my own co. hiring people and managing it myself jus as soon as it's feasible.
just a little correction, its robyn thompson the rehab queen.
great post
amynewbie
I'm assuming the
was not directed at my admitedly stupid question, but rather this Robin Thompson (or something like that)
I guess it would be funnier if I had a clue who she is.
rehabbing with no exp. is possible but i would not try it. once you start dealing with subs. they will know that you are inexp. and can and will take advantage of the situtation. i have done any rehabbs. and the first few i did most of the work. this helped me in future rehabbs. because i knew what to expect. i now have a crew that i direct myself. i do new construction and have to keep on my toes with subs.........kenmax
Kenmax,
That's pretty much what I was picturing. I used to co-own a number of medical offices, and I supervised all the buildout there. Clearly, I was treated differently after I learned what questions to ask, etc.
I'm not out looking for junkers, but I don't want to exclude the possibility if I run into a good project. I'm with you, though. When I had my hardwood floors redone, I did half of the work allongside the contractor I hired. Same with plumbing, and some electrical... just to make sure I wasn't getting screwed the next time.
To me, the biggest hassle with the tennant buildout was the scheduling... getting contractors to do their job within th timeframe.
knowledge of rehabbing and time will build you a reliable sub. list....kenmax
On rehab if your not in the "know" youi need to get someone in the boat with you that is..
THis is probably the most cash intensive part of RE investing with the greatest possibility for loss due to unexpected events and problems that didn't show up when you bought the place or you uncovered and had to repair the now exposed material defect. I have lost 50K and made 100K on them. After millions in rehab about 30% of the time things go as planned and profits are as good as I expected them to be. A good day is when only one thing goes wrong.
AN easier way to learn is to let your sub's mentor you in the process. Get bids for everything from "reliable" not the cheapest contractors and that should give you a good idea of the true costs to rehab. Read the book by Kevin Myers, and go slow
Randall
[addsig]
Dear Friends,
I have not held a General Contractors License since 1989. I lent it to a very attractive relative and when she finished the license was discontinued and I had the fun of paying off her little building sins. It was expensive and and in response I have never bothered to bring it to an active status. Of course this saves me a great deal of money as Workmans Compensation in this fair state is a tremendous burden.
Of course most of those workers who trained under me are now Contractors themselves. Some of them good and some of them a bit gaimy.
At 82 years of age I no longer am active
and a swinger of hammer and driver. I sort of stand around and make smart remarks or I run for material and offer smart ass remarks to all and sundry. Some time I translate the Contractors remarks into English for the benefit of the Inspectors and others who on occasion show up on site.
Right now being engaged in all steel containers there is a lot to teach and even more to learn. So it is interesting and I enjoy it.
So fear not just watch the engineering and be sure your plans are buildable.
Have fun, I always did. Lucius
I think it depends on where you are and the task to be done.
If it's patch and paint buddies and I would do that. If it's removed spray ceiling that has asbestos, I'm hiring a contract.
The city in which I'm buy a duplex requires a permit for just about everything. Even changing a hot water heater.
Well, I've been doing a lot of digging to figure out where I want to start. There are so many facets to REI, and a few weeks ago, I wouldn't have known a short sale from a sub 2 from a trust deed. I'll probably stay away from the rehabs for a little while. It seems to me that there are at least as many problems and unknowns to deal with AFTER the house is repaired... especially if you're trying to retail it yourself.
In the meantime, though, I have a come across acouple of people with general carpentry and rehab backgrounds (and some $) that have expressed an interest in partnering if the right opportunity arises.
Thanks, all.
Hoping to revive this (great) thread. I have similar questions, but different angle.
I have opportunities with a few rehabs now, but fear I'll find what I did before on a couple rehabs last year - the contractor/subs usually know roughly what you're making/what home is worth ARV and try to cut out your profit...I mean most of your profit, not just 10%. I'm sure it's b/c
1) I have a day job that doesn't permit me site time unless on weekends (very busy),
2) I'm in high end areas where junkers are 600k and can be rehabbed and sold for 900k...rehabbing is very easy to make a living off of and everybody, I mean everybody, does it/knows values, etc
3) b/c rehabbing is so popular here (MA/CT), anything close to a 'good' price/job bid usually means the trades aren't available for months and months (and the brokers take most of the good deals anyway before they become listings)...they're out doing their $200k trim jobs first. And yes, I'm looking for rehab, not price is no object restoration a la Bob Villa
I shouldn't quit my day job just yet b/c I dont know how many rehabs I'd have to do to get back to that level (good day job), but I have thought of/considered:
1) 'importing' labor from cheaper parts of the state - I have heard of rehabbers bringing folks in from the south (family);
2) a number of GCs have approached me for 50/50 deals...they do the work, I have the $$, we split the profits. People I know in other parts of the country say that is very expensive (but they are in different environments with more options it sounds like)
3) most rehabs in urban areas are done by illegals/unlicensed/usu. poorer work quality and so are cheap enough for folks to make money on. Definitely not an option here.
Still, I see some great deals and of course want to have my cake and eat it to...what would you all recommend?
LUFOS - If you have a spare minute, could you drop me an email at **Please See My Profile** I'm anxious to pick your brain on an RE issue that has had be baffled for some time now.
I do rehabs as a part time job for now, and won't quit my day job until I feel confident that I can consistently find good deals that have room for over 25k profit after rehab. My problem has been the "consistently locating good deals" part. There is so much competition out there for NOD's, REO's, HUD's and even MLS listings. Has anyone devised that secret formula for finding these gems? My next option is going to be targeted postcard maillings to designated areas.
Thanks for any replies/advice
Some excellent responses to this question. Owners can definitely find themselves at a disadvantange when dealing with contractors.
One source of help:
http://tameyourcontractor.com/
Two years ago without any building experience I bought my first rental/rehab. I met my highly recommended inspector at the house and we talked about the house for two hours while he inspected it. It needed a structural engineer for possible sink hole damage (turned out negative), roof, A/C, replumb, bathroom cabinets, and a ton of other "small" stuff. Obviously I could do almost none of the work - but several other investors gave me the numbers of some of their tradespeople. I met with them, spoke to them, listened to them, and was there most days.
It was three months of toil and trouble, but I learned a lot. It was also not a financial stretch for me. I knew that no matter how it went, I would not be in a pinch. Figure that some people spend thousands on boot camps, this was my boot camp.
Now about 12 rehabs later - I still do not do any of the work, but I can talk the talk. I also have some trades people in place who show up with a phone call, do good work, and invoice me. I can no longer show up at my multiple rehab houses every day.
Trying to find a head handy person that can just take my list of trades people and get the job done. Have not found that person yet, but I am working towards that.
Brenda
bought our frist 2 rentals last year, long distance from us as well. Big risk and time will tell if worth it in long run.
we have made a couple of costly trips to work on properties our selves, ( my wife and I ), we only hire what we do not know how to do or do not have time for. this allows us to check on what is being done and keep taba on things. However it is not the mpst profitable way of doing things, as a result we spend more than most would on a rental and will lengthen the time to a real profit in long term holding
John