When collecting bids from a contractor, my rule of thumb is to always get three bids, especially when you're new in this business. You also need to decide on one contractor versus many to do multiple jobs; what is best for your time management and pocketbook?
To figure this out, make sure that you and your contractor do a thorough walk through assessment of the property and define what needs to be done. This can be done through a repair estimates worksheet. Have your contractor write down the scope of the work to be done for each item that needs to be replaced/repaired (i.e. windows, kitchen cabinets, doors, fencing, etc.). By doing this you can determine the general contractor’s price for each item. This breakdown will tell you if you should hire the GC for everything, or if you could save money on an item that you feel is grossly overpriced. Remember, the price may be a little higher than if you were to personally do all of the leg work to get it done, but is it worth the couple extra bucks to not have to worry about it? Additionally, if you think your GC price is way too high, but don’t want to undertake any of the workload, remember that it doesn’t cost anything to get bids, so shop around a little bit more to get the best rate as that means more money in your pocket in the end.
Rehab Investor Tip: You get what you pay for. Cheaper doesn’t always mean better, and most times can mean more expensive in the long run. You don’t get a quality job, or it doesn’t get done right the first time and has to be redone, the work might not be done in the time frame you are looking for, and it might not bring the total job up to the finished product you are looking for. Sloppy work or ‘cheap labor’ to me means money lost.
Evictions can be a tricky task. You may have tricky tenants. Not all renters abide by the laws or pay on time or keep a tidy home. Being a landlord is not something that is as easy as it sounds and if you recently bought a rental property, you’ll understand what we mean. We’ll show you the different kind of tenants and the nightmares that can ensue with each.
But first off, let’s talk dollars and cents. There is a high cost to getting your property in suitable condition to rent out in the first place. You may have to spend a month or two or even three without any income while you fix up the place as most renters won’t be okay with living in an unfinished rehabbed house. All repairs and renovations usually take 25 to 50% longer to finish than originally expected so don’t get your hopes up when a contractor says it will take 2 weeks. Plan ahead.
Time. It takes time to renovate and fix up a place and most people have day jobs in which spending hours upon hours at their “project” home just isn’t feasible. Also, it takes a good amount of time to screen and find a good renter. Someone with good credit, a steady job and a suitable lifestyle in which you will feel comfortable with them living in your house. It could take a good month or two just to find the right tenants.
Reason #1. Save Your Own Capital
The main reason is that using your own money ties up current capital and prevents you from running and expanding your business. Other people's money can allow you to keep your business liquid, while allowing you to grow your business. OPM may come in the form of Hard Money Loans, Private Money Loans, or Traditional Bank Loans.
Reason #2. Leverage
As an investor, you absolutely need to understand the principle of leverage. Using OPM, allows you to use financial leverage to your advantage. OPM allows you to use only a small percentage of your own funds, to do larger, costlier deals.
Reason #3. Professional
Another way investors often fund their deals is through private lenders and investors that they know. Private lenders have money to invest, but may or may not be active investors. Private lenders are everywhere if you know how to network and ask the right questions. Who know you may even have family members that would gladly loan you money for a state return, backed by real estate. Hard money lenders are professionals who put their money to work and expect a return. They require paperwork and due diligence but they won’t be like those friend-and-family investors who fret night and day about their money.
Reason #4. Speed
Some investors just try to do it alone using their own capital. When a repair comes up, they save up their money and when they have money they make the repair. This can take a long time. It doesn’t make sense to delay generating a return on your deal; instead, borrow the money, make your repairs and generate a return on your deal sooner.
Please let us know if you are in need of additional funding for your projects. We have a network of lenders that may your needs.
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