Podcasts Business Flipping America Ultimate Rehab Estimator, Pat Dornan

Ultimate Rehab Estimator, Pat Dornan

Published: May 29, 2018, 12:37 a.m.

Pat Dornan is Guest, Ultimate Rehab Estimator News You can use: Washington Post: Article on Selecting a Realtor, Ilyce Glink Very good - Some differences with selecting a realtor to work with you as an investor Treat house as inventory, not home

  • Daily costs
  • Cash flow
  • Opportunity costs
Forbes: How To Get Rich In Real Estate - Without Being A Landlord REIT: If you\u2019re good with a 4.5% return, go ahead. Book Review and Notes: Donald Trump: The Best Real Estate Advice I Ever Received.
  • It's not just location. It's also price and product.
  • Go where wealthy people are living and playing
  • Fit buildings to the area
  • Know your point of indifference. When it is crossed, walk out.
  • Commit to win.
  • Don't count on luck.
  • Take your profit and move on. \xa0
  • Know the local conditions and traditions.
  • 98% of real estate is the same everywhere. For the 2% you must have to win, find a local person who is knowledgeable, reliable, and trustworthy.
  • Buy the neighborhood, not just the house.
  • Watch the pennies and the dollars will follow.
  • Puppies become dogs.
  • Buy low, sell high, and don't be greedy. \xa0
Questions from listeners: Alex from Denver: \u201cI\u2019m about \u2154 of the way through a rehab, but my contractor has disappeared. I can\u2019t get him to respond to texts, calls, or emails. I have found that he took several shortcuts and created problems I have to fix. There isn\u2019t enough money left in the rehab escrow with my lender to cover all of these problems. What do I do?\u201d This is actually 3 problems rolled into one question:
  1. Contractor disappeared
  2. Fixing contractor problems
  3. Running out of money
Contractor disappeared:
  1. What does contract say? Notify, then dismiss. You have interim lien waivers for all work done so far, right?? This is why we are constantly interviewing contractors.
  2. The contract stipulates that all work will be performed to code and to the standard described in the Scope of Work. Contractor will make all needed corrections until standards are met at his own expense. Contractor disappeared? It will come out of your pocket, so KEEP A CLOSE WATCH.
  3. Running out of money. Could happen even if the contractor is fine. Unexpected problems occur. (almost an oxymoron - \u201cexpected\u201d problems aren\u2019t usually a problem). The Unexpected can drain cash and cause budget concerns.
    1. Contingency in budget
    2. Cash Reserves
    3. If budget is busted, can we sell for higher?
    4. Dump to another investor with cash to finish. Try to break even and move on.
Contractor problems are the NUMBER ONE issue with rehabbers and their work. My business limped along until I found a good one and then struggled mightily when my good one went bad and I didn\u2019t have others lined up. Marty from Dayton OH: I\u2019m looking at 4 or 5 possible deals that I can buy for less than $20,000 each. I can buy two of them. All of them are in the same area - it\u2019s not a great area, but it\u2019s not a war zone either. The realtor tells me they will rent well and the return will be pretty good. My concern is the value of the property isn\u2019t going to increase much over the years. What are your thoughts?
  1. Begin by reviewing your personal goals. If it is long term relatively passive cash flow, these may be a good option.
  2. One good question I\u2019ve learned to ask myself over the years is this: \u201cHow could this property kick me in the fanny?\u201d Your answer to that question may guide you. In many cities there is an ebb and flow to neighborhood quality. They are either improving or declining. This is less often the case in suburbs or small towns. Look at the larger trends in the area.
  3. A similar question is to consider the upside. What are the potential rewards? Barnesville, GA, 2009, $8000. $650/month rent.
  4. Unless you buy a distressed property or a temporarily distressed location, real estate isn\u2019t typically going to appreciate much beyond the rate of inflation. In high growth areas you will see an exception, but everything has cycles. High growth areas are good places to buy now, but even they will eventually level off.