Rehab Example for Newbies - Posted by Jimmy

Real Estate Investing Duplexes
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Posted by Andy on November 16, 2007 at 13:12:30:

How do you pay your general contractor?

Do you pay him a flat fee and then pay individual subs separately?

Or do you pay the GC one large payment(or installment) which includes the portion that goes to the subs which he dispurses to them?

What other advice do you have when hiring/working with a GC.

I spoke to one potential GC today. He’s actually the guy that built the house my wife and I bought recently. From what I know about him he’s a stand up guy and I think I’ve got a pretty good BS detector. My building inspector who is the most thorough one in town thinks he’s a solid builder and coming from him that means alot. He’s been in the business since the late 60’s. He’s partially retired and I believe he just does this stuff to keep himself busy.

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Rehab Example for Newbies - Posted by Jimmy

Posted by Jimmy on November 12, 2007 at 09:45:29:

got a live lead on a 1500sf duplex. as I work the numbers, I want to share the analytics with newbies and others interested in doing rehabs.

1500sf duplex. medium sized East TX town. orig built in 40’s. occupied as recently as 2002. owner gutted it, intending to do a major overhaul. then he died. kid lives far away. must dump it. can’t find buyers. realtors don’t want to list this. [you’ll see why below]

has new roof and new siding and is “dried in” (meaning exactly that. the rain does not get in and it is not in a state of deterioration).

needs EVERYTHING ON INTERIOR: (a)total re-wire job. (b) new freshwater line to main; (c) new sewer line to main; (d) all new plumbing fixtures (toilets, sinks). (f) all drywall. (g) all elec fixtures. (h) needs CHA retro-fitted. countertops, cabinets, vanities, etc, all new flooring. (i) windows and doors.

when electrician and plumber do their jobs, I’ll be sure to have separate meters for each unit.

when finished, I would have a pair of 2/1 units rentable at $475 each, and the duplex would be sellable around $75,000.

asking 20K. My uneducated guess is about $30,000 to complete. I’ll get much more accurate numbers with my contractor.

I have a ton of leverage in this deal. there are only a handful of people who will take on a major, major in this town, and I’m one of them. I would love to be able to get this one finished for a total investment of $47,500 or less. kind of a magic number for me in major rehabs. If I can do it, my gross rents would represent 2% per month on my investment. and that works for me.

I’ll plug in more info as deal moves along

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Re: Rehab Example for Newbies - Posted by James - Michigan Inv

Posted by James - Michigan Inv on November 12, 2007 at 14:32:51:

Jimmy,

Looks like a good deal - thanks for sharing your property. I think we need to do more of these on here so others can see what’s going on.

I’d say your 30k is low, but maybe you can tap into a cheaper labor market. :stuck_out_tongue:
I don’t think you are far off either, so it looks like a good deal, especially if it’ll sell for 75k pretty easy.

I’d say 36-38k for all that…1500sq ft is a lot. Doing one later next week…insulation, electrical,Drywall - it’s studded out and about 1100sq ft. The plumbing issue would have me concerned as I don’t have any experience for a reconnection. Maybe it’s cheap.

Good luck,
James
989.213.6108

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Re: Rehab Example for Newbies - Posted by Andy Moe

Posted by Andy Moe on November 12, 2007 at 11:50:24:

Hey Jimmy,
Thanks for volunteering the details. I’ve enjoyed reading your posts and hope to be in a similar situation as you at some point.

Is this a typical deal for you?
How did you find out about this property?
How many of these do you do per year?
Do you typically work in S8 or better type neighborhoods.
Do you hold all your properties?

Look forward to hearing further details on this and other new deals.

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Re: Rehab Example for Newbies - Posted by Rich-CA

Posted by Rich-CA on November 12, 2007 at 21:42:45:

I thought low labor costs was not something MI was known for. TX is, in fact San Antonio (the city where I have property) has the lowest cost of labor of any major city in the US. Materials costs are pretty static, so differences are a combination of how much labor costs and how fast laborers work.

For example, I recently did a rehab in Phoenix and another in CO. The one in Phoenix took 2 months (VERY slow and a strong recommendation for being on site yourself). The one in CO took 3 weeks (what I consider more normal). Sq ft is 1300 for both properties.

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5 Answers - Posted by Jimmy

Posted by Jimmy on November 12, 2007 at 13:55:05:

Is this a typical deal for you? YES. EXCEPT IT IS A ONE-PROP DEAL. I OFTEN BUY REHAB CLUSTERS.

How did you find out about this property? NEWSPAPER AD BY SELLER.

How many of these do you do per year? 10-25. JUST DEPENDS ON THE SIZE OF THE CLUSTERS

Do you typically work in S8 or better type neighborhoods.\

S8 AND WORKING CLASS AREAS. I LIKE LOW INCOME AREAS BECAUE I HAVE A STEADY SUPPLY OF TENANTS.

Do you hold all your properties? NO. I HOLD MOST OF THEM, THOUGH. I DO SELL PROPERTIES SOMETIMES, WHEN I NEED TO HARVEST SOME CASH OR CAN MAKE AN EASY, QUICK SHEKEL

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Re: 3 Questions - Posted by Andy

Posted by Andy on November 14, 2007 at 07:27:51:

Do you use a general contractor to manage all the subs or do you do that yourself?

What advice would you have for someone starting out on whether to use a GC or get my own sub contractors? I work a full time job so I wouldnt be able to be on site all or even most of the day. Mainly just before work, lunch, after work and all weekends. I have successfully owned rentals but never done a full blow rehab.

What advice in general would you have somone in my position?

Thanks

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Mazel Tov (nt) - Posted by Bill H

Posted by Bill H on November 12, 2007 at 18:27:37:

z

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3+ Answers - Posted by Jimmy

Posted by Jimmy on November 14, 2007 at 14:59:12:

  1. sort of. In Texas, anyone can be a GC just by saying so. plumbers need a license. so do electricians. so do HVAC people. but not GC’s. the guys who run my rehab jobs are not licensed, but are skilled. one is a fork lift mechanic by trade, and a d@mned good carpenter/GC by experience. 3 others have all the skills of a GC, but are not required to have licenses. one is a handi-woman whose dad is a crack carpenter/Pentacostal preacher. a good team.

  2. definitely get an ace GC. they earn their keep by keeping your rehab costs down. they know which plumber NOT to use, and which AC guy works out his house, and which retired electrician is looking for some jobs and will work cheap… [for the record. I don;t know the difference between a wood screw and a finishing nail. and don’t really care. I know what various jobs should cost, and I control my rehabs from the accounting control angle.

  3. the most important asset in your rehab biz is your people. you will continually upgrade your people, firing and hiring. and people you think are wonderful now will not be your stars later. get used to it. I have a talent for finding talent and bringing it along. but that talent attracts attention, and they get busier and busier and they raise their rates…and I find newer, less expensive talent and start over. a never-ending process.