Posted by Jack on May 23, 2003 at 18:24:58:
Absolutely. There is a business in my city that pretty much buys only REOs and Foreclosures, and wholesales them to rehabbers. A lot of them, too.
Problem is, you have to have the cash on hand to pay the bank, and then flip it. Banks won’t allow you to assign your contract. If you’ve got the cash, go for it.
Reflecting on my first rehab. - Posted by Greg
Posted by Greg on May 22, 2003 at 10:34:41:
The sale of my first rehabbed home is finalized. The only thing that would make the deal fall through is if the buyer loses his job or CHFA finds that his finances are not accurate.
With this I reflected on my first rehab and tried to think about ways I can improve my business. I would like to learn how to manage/market my business and not have my hands into everything- leverage other people. I have read Gerber?s book. I also want to learn how to better control the deal.
The big area of reflection was of course the infamous contractors and handymen.
I have one 75 y.o. guy with two sons who enjoy demo work, yard work, and painting. The 75 y.o. works hard yet his sons are not reliable at times eventually they get things done.
I am concerned about liability issues with the 75 y.o. such as heart attacks and strokes. He has had a 4-way bypass already.
As I mentioned I want to be less involved with the hands on work. My guys seem to get angry if I am not participating in some of the work. He called at one point and said, ?Did you forget how to get here!? Now I am paying him, and his sons and I should not have to be involved with the work. I do not need to be there all the time. I want to focus on the business. Also I find that these guys are like children and need babysitting. When I am there they work even harder.
The other problem I had with these guys were issues with supplies and frequent trips to my local home supply store. They all have bad credit and not a strong employment history. Plus one care to share among them. Therefore I found myself going back and forth to the store everyday to get more paint or whatever. I thought of setting up a line of credit for them at the store. Or get them a credit card with a spending limit.
My handyman team needs some fine-tuning and they need to realize that I am in the business of buying and selling homes. I cannot spend hours doing work on a house. I should be spending time finding and working on deals.
I found a Plummer who does not turn his nose up when asked to do work in lower income areas. This seemed to be a problem with contractors. Many thought they were too good or busy to take work in such areas. Plus every one of them tried to rip me off. I knew my price limit. I also sensed that because I was an investor they wanted to charge me more.
I did not use contracts when working with the contractors. I need to view a few contracts that people use on this site. The contract would specify things such as price, dates of completion, and penalties for not completing. Will contractors sign these forms?
I have a good electrician who understands rehab work. Recommended by my agent.
I wanted to thank everyone for their help during the rehab of my first home.
Sincerely,
Greg
Re: Reflecting on my first rehab. - Posted by Al - So Cal
Posted by Al - So Cal on May 23, 2003 at 12:37:02:
Thought Id share my rehab story from years back. Bought a fixer near the beach - spent 6 months fixing and sold it - netted out my net proceeds and discovered an amazing thing. I could have saved all the work and sold it for less and made the same amount of profit. The hottest item in RE is the fixer upper.You run an ad and get a jillian phone calls. Almost makes you want to beat up a property just to advertizeFIXER-NEEDS LOTS OF WORK-BRING YOUR HAMMER.
WILL SELL BELOW MARKET.
Stand back. You might get trampled. Youve tapped into the American Dream. I have certain ads and headings that generate massive phone responses. The human psyche just doesnt have
a chance. It can`t resist. The Big Vacum of Opportun-
ity just sweeps you up. Good Luck.
thanks - Posted by Anne_ND
Posted by Anne_ND on May 22, 2003 at 18:31:08:
Greg,
Your post was very insightful and I hope will be helpful to others who are thinking about rehabs as a fast way to make money.
I have had all the same experiences as you. Here’s what I’ve learned.
It is usually not cheaper to use the cheapest workers, for exactly the reasons you state: they aren’t reliable, they give you an attitude and they need rides to the store. Here’s another reason: workers without liability insurance can cost you all of your profit. Nobody walks onto my construction sites anymore without showing me their liability coverage first. Never mind the old guy who falls off the ladder and hurts himself- what if he installs something faulty and 8 years later a person gets killed and it turns out to be because of work this guy did for you. Doesn’t matter if it was sold many years earlier, either your insured contractor is liable or you’re liable.
Some of my best referrals for people who do good work are people who are already doing good work for you, and want to get asked back to the next party. My best carpenter is a guy who was recommended to me by my floor covering guy. The floor covering guy does a very professional job, and he knows others who are also professional in their respective areas. Also ask at lumberyards or other contractor-supported venues- they won’t recommend people who do shoddy jobs because then you might not come back and order more cabinets (or whatever). Ask your electrician to recommend a good drywall guy or carpenter.
We now work with a general contractor and it’s been great because even when I’ve got good people on the job, they squabble like children. The last time I was the GC I had the plumber mad at the floor guy and the floor guy mad at the plumber and both of them telling me their work was ruined by the other. A bunch of prima donnas I tell you! So on a big job, if you can afford it, a GF is a nice thing to have. Also, they have connections and have actually gotten me cheaper prices on work because they know who’s good and who’s available.
Finally, we pay everybody promptly, and they all like that.
Good luck, sounds like you’re making it work.
Anne
As others said, get rid of the 75 year old guy. And think VERY hard before giving a contractor a line of credit or credit card. That’s like asking your hungry golden retriever to keep an eye on your raw filet mignon.
Re: Reflecting on my first rehab. - Posted by Tim
Posted by Tim on May 22, 2003 at 17:13:47:
How do you know the contractors weren’t too busy to do your job, or that they thought they were too good to do the job? Also, how do you know they were trying to “rip you off”? Just because your price limit was less than their estimate does not automatically mean they were trying to cheat you. When I am wearing my contractor hat I have one rate for everyone, my investor rate varies depending on my perceived risk. Does this mean I am ripping people off when I have on my investor hat?
Re: Reflecting on my first rehab. - Posted by eric-fl
Posted by eric-fl on May 22, 2003 at 15:45:42:
Well, first off, it doesn’t sound like the old timer with the idiot sons is a great setup. Probably time to ditch them, but from your post, I think you already know that.
In terms of finding contractors, I’ve found the best source to be, unsurprisingly, referrals from other happy customers. I’ve gotten a lot of them from my local REIA, and been happy with most.
If I can’t find what I’m looking for like this, the next best bet is to look for guys who are SMALL operations, but still licensed. We’ve done unlicensed once or twice, (not on purpose), and that wasn’t a good idea. And the big, full page yellow pages guys are pretty full of themselves, just as you describe.
I remember one time, I need some minor electical work done. I called, asking for someone to come out, and give me an estimate. They asked me if I wanted to have the work done, or just have an estimate. I told them “I want an estimate, and if I’m happy with it, then I’ll get the work done”, thinking this was common sense (naively). The response I got was that, if I just wanted an estimate, it would cost X$, or I could just have them come out and do the work without an estimate. “So let me get this straight”, I said. “You want me to pay you to tell me how much it will cost to give you my business, or alternatively, you want me to just give you my business, without first knowing how much it will cost.” The response I got was, and I swear I am not making this up, was “Our electricians are not estimators, and our estimators are not electricians”. I thanked her for her time and hung up. Small guys. Mom & Pop. All the way.
Re: Reflecting on my first rehab. - Posted by Jim
Posted by Jim on May 22, 2003 at 12:39:58:
Rehabs can be difficult especially if you don’t set the presidence of where you stand in the people you employ to do work for you.
The way I do it is, I have a credit line at a couple places. Before closing I purchase all the materials and place them on a will call. So when ever they need materials they can go and pull from the list that has already been paid for. Each time someone goes to pick something up they call my and fax me what was taken. Much easier than hands on.
Next all contracts are signed and all penalties must be enforced. I have been through atleast 10 differnt contractors the honeymoon stage last for atleast 2-3 projects then they get greedy or become unreliable.
The most important thing I have found out is communication, I keep a communication log for each job and each time a I speak with them, I write down any and all commitments or actions items that might pertain to the contractor or to myself. With him knowing that I keep this it is harder for him to weasel anything or not meet a deadline.
Also there is a corporation in place, so it is set up that I am not the only one, so all the blame can never fall on me it is being in control but not letting them know that you really are the one who is in control.
Hope this helps good luck on your next project…
That was like … - Posted by Jack
Posted by Jack on May 22, 2003 at 12:34:39:
That was like getting a big fat kiss from a pretty woman…through a SCREEN DOOR. Tell us what your profit will be!
(grin)
Re: Reflecting on my first rehab. - Posted by Greg
Posted by Greg on May 23, 2003 at 16:26:59:
AL:
Interesting idea. I sense people like deals or “feeling” they are getting a deal.
It would seem that your ads are selective for a particular group. Like the handyman guy who wants to buy his first home or someone looking to buy in that area but everything is too expensive.
Most people will not even touch a home that requires just a little work. They want to move in and buy furniture. This is where rehabbers come in- it may not cost a lot to fix some of these places up.
I had a “human psyche” experience with the buyer of this home. I was lucky because it did not require a lot of work but it still looked extremely horrible to buyers before I rehabbed it.
The buyer has been searching for a decent single family home and lucky for him he found mine. Of course he hired an inspector who felt the roof needed to be replaced. So he asked if I would contribute 4K to the repair of the roof. I told him no way I could fix up the house and sell it for 10K more then I am selling it to him for. He never asked again- somehow he will get the money. You know he is not going anywhere. “I found a deal!” But he does not know how much I paid for the home and put into it. It is a decent profit for my first rehab.
Re: True Words! - Posted by Jack
Posted by Jack on May 23, 2003 at 13:49:33:
You are absolutely correct. I just wholesaled a fixer to a rehabber. After fixup retail is in the $120,000 range. I made $18K. The rehabber will be very lucky to net that much. Fixer properties go for a LOT of money because they are so hard to find and there are a lot of rehabbers competing in my large city. That’s why I can sell them for prices that would astound anyone trying to use a LeGrand “formula” to make their estimates. Forget the formulas, and learn your MARKET!
I should say, they are hard to find unless you know how to do it.
I didn’t lift as much as a finger, and my payday is better. Rehabbers need to RETHINK!!! Some of them will not get out of the BOX they are trapped in. And I hope they never do!
Re: thanks - Posted by Greg
Posted by Greg on May 22, 2003 at 19:15:56:
Anne
Thank you for the positive feedback. Your points are well taken. When I wrote this I was hoping that new people may benefit from my experience.
My goal when doing a rehab is to just make the home, neat, clean and liveable.
The type of homes I am looking for are homes that need cosmetic work, utility work, some outside work, not major structural work. My first home was one that people looked at as owner occupants but they did not want to put the money into fixing them up. Lower income first time homebuyers.
The 75 yo guy lived 10 minutes from my rehab home. The rehab home looked like a mansion compared to one he rented.
The thing I found about contractors is that they are perfectionists, arrogant, uncompromising, greedy, with poor communciation skills. Many did not seem to meet my needs as a rehabber. I would tell them that I just want it to look neat and clean. Not a mansion. They want to do too much work.
You mentioned GC. How did you find yours? With low income houses is it worth hiring a GC? Most of the GC have large adds and why are they not doing rehabs themselves?
I may still use my 75 yo guy to do yard and demo work.
Sincerely;
Greg
I don’t know about the KISS thing!!! - Posted by Tim (CT)
Posted by Tim (CT) on May 22, 2003 at 20:10:02:
Congratulations.
Re: True Words! - Posted by Greg
Posted by Greg on May 23, 2003 at 16:29:24:
Jack:
Can one wholesale a REO property?
Thanks Greg and Anne - Posted by Christine616
Posted by Christine616 on May 22, 2003 at 20:45:14:
I am one of those newbies who is considering rehabbing. I have enjoyed your posts and am taking notes. 
Thanks
Christine616
Thanks Greg and Anne - Posted by Christine616
Posted by Christine616 on May 22, 2003 at 19:26:52:
I am one of those newbies who is considering rehabbing. I have enjoyed your posts and am taking notes. Thanks
Christine616