FIXING-UP or "REHABBING" the
property
This is,
undoubtedly, the most FUN part of this business! Having spoken
with hundreds of investors who have ripped out kitchens,
smashed toilets and baths, kicked in doors and windows etc.
which we, in the trade, laughingly call "Demolition" to get to
the next stage called "construction" or "renovation" is a
RUSH. Long days seem to glide by and suddenly it's early
evening and you're surrounded by rubble and dust. Never mind.
You're on your way to making that first million! HOWEVER ....
although this is a lot of fun, it gets a bit old after 3-4
weeks (I call it "the wall"). At that point, you loathe
having make the trek to "the property" on a Sunday morning
when all you want to do is watch the game later. What seemed
like a good idea to save on labor costs is a bit of false
economy because what could have been done in 2-3 weeks is
now taking as many MONTHS and suddenly you remember the
mortgage payments could have paid for some laborers for the
same amount ... and you could be back home with your feet up
and the property on the market. PLEASE, PLEASE ask around
for some experienced laborers or at least a reasonable
General Contractor who won't rip you off. ASK YOUR OTHER
INVESTOR FRIENDS for some referrals. I promise, you'll LOVE
this business IF you DON'T do all the labor yourself!!
A personal story ..... my first "flip" was in downtown
Dallas (the "hood"). Now, I knew that you're supposed to use
other people's money, experience etc. because I'd taken the
courses and read the books. However, I was 'desperate' to
get my first deal and so I
offered $9,000 for a 1 bed, 1
bath home - they were asking $10,900 so I was elated! YEAH!!
Now, this house had no bathroom floor (literally), virtually
no sheetrock and no kitchen. But hey .... I was pretty good
at "DIY" (Do it yourself) so I said to myself, SELF!
I can get this thing renovated, fixed up and sold in a
couple of months, make my first $20,000 and move on to make
my first million. The reality was ........ yes, I had TONS
of enthusiasm and had that thing demolished in a couple of
days. Then - where should I put all the trash? Well, after
some hassle with the city I managed to get a dumpster for
about $500!! Then I set about buying some nice tools and
materials. I installed a fancy new back door and some new
windows. The neighbor looked at me in disbelief and said
"you know those will be stolen within a week don't you?"
just blew it off and moved on. Anyway, after 3
weeks
I had definitely hit "the WALL". That's the point where, I
knew I had done a lot .... but the finish line seemed
FURTHER away than ever before. There's SO much to do. Every
spare moment and weekend was spent at this 'fun' project
when I'd rather be at home watching TV! Still, it's my new
career, I said. I pressed on. Another month went by. And
another. AND another! Eventually, a couple of Hispanic guys
stopped by and asked if I needed help. Well ...... OK. How
much? "About $6K" to finish the whole house. So they got to
work. Finished in about 2 weeks. Everything. It was perfect.
Too perfect, in fact. The BEST house in the neighborhood. I
was now into this
for about $23,000 not including any value for my own labor
and risk. I tried to sell it for about $30K but no-one could
qualify for this mortgage and no other homes were selling
for ANYTHING like this amount! No lender even wanted to mess
with a $30K deal anyway. Bottom line was, a single Hispanic
guy eventually saw the home and we agreed on a CASH price of
$24K. It finally closed and I made about $1 on the whole
deal. I heard later that the guy needed to sell it because
he had been beaten up a couple of times (by neighbors in the
same street!) Still, I had learned my lesson. Here it is
........
(to be continued)
LABOR
COSTS
TYPICAL MATERIALS
TIMELINE!
THE "PUNCH LIST"
labor
costs?
