First Rehab Deal – Lessons Learned

Hello Blogosphere!

It’s been quite a while since I last posted.  It’s been a busy few months to say the least…busy with work, family and the usual commitments AND our first rehab!  I’ve barely had any free time and certainly no extra time to be blogging.

Let’s see if I can give a somewhat brief summary of what has happened with our rehab.  Like I’ve mentioned in the past, we’ve done rehabs in the past, with the homes we’ve lived in, but this is our first “official” rehab, with the intent of making this a real business.  So far, so good.  Not to say that there haven’t been stressful moments, but as rehabs go, it hasn’t been a nightmare.  Maybe that’s because we did so much research and due diligence before we bought the house, who knows?  And maybe it took so long to get this deal after many, many rejected offers because the other houses wouldn’t have been “right.”

Anyway, we started work on the house just after closing (late July) and have been pretty much been working on the house 7 days a week up until our Open House a few weeks ago.  The house we purchased is a 3 bed/1 bath home, 100 years old, so there was a lot of work to do.  We basically updated almost everything in the house – new kitchen, new bathroom, new windows, new flooring, new landscaping, etc.  We were going to install a 1/2 bath, but other unforseen repairs ate up the budget for the new bath.  My husband probably did about 90% of the work.  Since he worked construction for years prior to working in Corporate America, he’s pretty handy.  He even did a great job on things he’d never done before, like tile work.  We hired out jobs that we needed to and/or jobs that needed to be permitted, like electrical work and new windows.  Although we saved a ton of money having him do the work, it didn’t save us money where the timeline was concerned.  The project took longer than expected since he’s only one person and things took him longer to do.  However, now we know which projects he’ll tackle in the future and which ones we’ll hire out next time to save time.

At the Open House, we had 4 families view the house and 2 showings a couple days afterward.  Then, 4 days after the Open House, we got our first offer.  We negotiated back and forth and agreed on price and terms.  Since we’re pretty much getting our asking price, we cannot complain. So, if all goes well with our buyer and his financing, we’ll be closing by the end of the year.  Not too bad!  We’re keeping our fingers and toes crossed that it will go well.

It’s been a bit of a challenge doing this rehab while I’m still working full time.  I am doing all the phone calls and legal/financial stuff for this rehab.   I like to say I’m the “brains” and my husband is the “brawn.”   Although I’ve helped with many of items at the house, stuff I can easily do like paint and other cosmetic items.  I don’t mind that sort of thing, but I’m sure tired of painting!

We have learned so much during this rehab.  I thought I’d share a list of our “lessons learned” for this project:

• Get a GREAT rehab/hard money/private lender – specifically one with lots of rehab experience.  We were lucky enough to find great, local lender and it’s been a huge reason why we think things went so well.  Our lender provided excellent tips, guidance and advice throughout.  I tend to ask a lot of questions and they were always there to assist, especially since this is all new to us. I cannot imagine getting through this deal without this help.
• Plan, make lists and plan some more!  I am a huge fan of making lists…lots of “punch lists” for the items that need to get done.  It’s a huge help in making sure you do everything you’re supposed to do, in the order that makes sense. 
• Ask for help! Not just from your lender, but from anyone that can assist – lenders, Real Estate Agents, contractors, etc.  You’ll find in most cases, people are happy to share their knowledge and help.  If they’re not willing to help you, then they’re usually not the type of people you want to work with.
• Get your “Team” in place.  This is something anyone in Real Estate Investing tells you – get great people on your Team, such as your lenders, Real Estate Agents, contractors, attorneys, title companies, etc.  We finally have assembled a great team of “go-to” people as a result of this rehab. This list of people will be a tremendous help for our next rehab and will save a ton of time during each phase of the project.
• Only work with people who respond and/or respond in a professional manner.  This is obvious, but I cannot stress this enough.  In the midst of each item we needed (e.g., contacting window installers, for example), I contacted several people looking for quotes on projects.  Through lots of trial and error, we found a great window contractor.   For each person/company we hired, we went with the people that responded quickly, promptly and professionally (either by phone or email).  It’s amazing in this economy, where contractors are especially hurting for work, that there are some that won’t call you back – ever – not even to say they’re too busy or don’t want to do the job.  Makes no sense to me…but I immediately cross these types of contractors off my list…if they cannot even call you back, or don’t show up to even give you a quote, do you think they’re ever going to do a good job for you? Probably not!
• Before you start the work, call your local building inspector/inspection department.  Each city and town has different rules for permits, so it’s best to call to see what permits you’ll need.   Also, if the contractor pulls a permit for you, make sure it’s posted where it can be seen and keep a copy for your records.
• Doing the work yourself doesn’t always save you money. If doing the work yourself extends out your timeline too long, you probably won’t be saving much money, especially if your holding costs are expensive per day/per month.   Sometimes it actually saves you money to pay the money to hire out the work and you can get the house listed for sale faster.
• Pick the right list price.  We had a goal of listing the house WAY under houses in the area, for a comparable home, to help get a quick sale.  We think that was a reason we had so much interest after listing the house.  We could have held out for 20k more than we did, but then if it didn’t sell fast, we would have had way too many holding costs, nevermind heating and shoveling snow at the house through the winter!!

That’s it for now.  Hope you all had a nice Thanksgiving!

Happy Investing!

Tags: bank owned houses, closing, first time home buyer, flip houses, flipping houses, flipping real estate, lessons learned, real estate, Real Estate Investing, REO, REOs