BRRRR Investing Basics: Step 2, Rehab
BRRRR basics, the first R- Rehab!
Ahhhh….the smell of cat urine and rotting food. A backyard full of trash and dog poop. It’s the first day of rehab, it’s like Christmas to a real estate investor- the most exciting day of the project! When most people see a house in poor condition, full of trash and with so many pets that feathers are fluttering out the window- they think- “what a mess!” Investors see a house like that and they think- “what an opportunity!”
Don’t get me wrong- opportunity is universal to us- this doesn’t mean an opportunity to take advantage of a person in a bad living situation- it’s an opportunity to help someone get a fresh start, but it’s also an opportunity for you to provide a new owner with a clean and beautiful home or a renter with a great place to lay their head.
In order to get to that opportunity, you’ll have to do some dirty work. There are two ways to go about it; you can hire a general contractor (GC) to come in and take care of everything OR, you can do big chunks of it yourself. If there’s room in the deal for you to hire a contractor and still end up with that 25% equity that we discussed in the previous post, that might be a good way to do. If you have the time and willingness to work, there’s no better way to learn than jumping in and doing what you can on your own. It will help you understand how difficult or time consuming each task in a rehab might be, which will help you negotiate more effectively with contractors in the future. You’ll learn where to push back and where to be reasonable- and you should always be reasonable. Remember, everyone you work with is on your team- if you do well, they do well. They all have rent to pay and mouths to feed, just like you.
Finding the RIGHT contractor- that will be your biggest challenge, especially on your first job. Do you hire a GC or do you hire and supervise the individual contractors on your own? If you supervise the job- in what order should the contractors be hired? How should they be compensated? Should you pay them a deposit up front? Do you trust them with your money?
So many variables here, it will make your head spin. The best way to start is ask your friends and family for referrals- do they know someone trustworthy and reliable? Are they reasonably priced? Will they let you shadow them and learn a bit? There are costly and frustrating surprises on every rehab project- there will absolutely be plenty of those on your first few. Know that some sort of surprise is coming and don’t beat yourself up- that’s how we all learn.
Boise Turnkey partners with several local, honest contractors in all fields. We are happy to refer you to a trusted partner or manage a rehab on your behalf. Let us know how we can help!
Want to learn more about the rehab process? Check out the video below to learn the 3 mistakes every newbie rehabber makes!
