Home Renovation Q&A: Permits, Building a Scope of Work, & Managing Renovations

Summary

BiggerPockets Real Estate Podcast Episode: Home Renovation Q&A: Permits, Building a Scope of Work, & Managing Renovations Release Date: April 11, 2025

In this episode of the BiggerPockets Real Estate Podcast, host Dave Meyer teams up with Ashley Kerr to address pressing questions from the BiggerPockets community. Focused on home renovation, permits, deal analysis, and managing renovations—especially in long-distance scenarios—the episode offers invaluable insights for both novice and seasoned real estate investors.

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1. Navigating Properties with Unpermitted Work

Key Discussion Points:

• Assessing the Risks: Roman from Upstate New York inquires about purchasing a multifamily home where previous renovations were done without permits. The property is a legal two-unit home offering a monthly cash flow of $900 but requires retroactive permitting for kitchen and bathroom renovations.

• Legal and Liability Concerns: Ashley emphasizes the importance of addressing unpermitted work to mitigate liability risks, especially in states like New York where tenants can sue for issues like electrical malfunctions leading to fires.

• Practical Steps:

  • Engage with Local Code Enforcement: Understand the specific requirements to bring the property up to code.
  • Scope of Work Evaluation: Determine the extent of unpermitted work to estimate costs accurately.
  • Contingency Planning: Incorporate contingencies in purchase agreements to protect against unforeseen permitting costs.

Notable Quotes:

• Ashley Kerr [02:01]: “Talking to the code enforcement person in that area... can give you an idea of what's expected to make this property permitted.”
• Dave Meyer [04:06]: “I couldn’t sleep if I knew there was something even slightly illegal or off kilter in my property.”
• Ashley Kerr [04:59]: “If it's an unpermitted unit... getting permitted as a third unit... requires significant work.”

Conclusion: Retroactively permitting renovations is often a necessary step to ensure legal compliance and protect against future liabilities. Investing time in understanding local regulations and thoroughly assessing the property's existing modifications can help determine whether the investment remains sound despite initial permitting challenges.

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2. Mastering Deal Analysis for Duplex House Hacking

Key Discussion Points:

• Overcoming Analysis Paralysis: Tanner from San Antonio seeks advice on confidently analyzing duplex house hack deals within the $250,000 to $350,000 range to avoid getting stuck in indecision.

• Essential Tools and Practices:

  • BiggerPockets Calculators: Utilize built-in worksheets to methodically assess every financial aspect of the deal.
  • Estimating Insurance and Expenses: Obtain insurance estimates through agents or online tools to enhance accuracy.
  • Community Feedback: Share calculator reports on BiggerPockets forums to receive constructive criticism and insights from experienced investors.

• Networking and Continuous Practice:

  • Engage with Local Investors: Networking can provide invaluable local market insights and potentially reduce costs.
  • Build a Buy Box: Define specific investment criteria to streamline deal evaluation and improve decision-making speed.

Notable Quotes:

• Ashley Kerr [15:05]: “Use the BiggerPockets calculators... there’s already a built-in worksheet going line by line.”
• Dave Meyer [16:03]: “Those are things that you can mess around with to try and get your analysis really crisp and sort of to maximize your return.”
• Ashley Kerr [20:11]: “I can eyeball that and I can analyze it like this. I can run those numbers in my head because I’ve done so many.”

Conclusion: Becoming adept at deal analysis requires consistent practice and the utilization of robust tools like the BiggerPockets calculators. Engaging with the community for feedback and networking with local investors can further enhance analytical skills, enabling quick and confident decision-making when lucrative deals arise.

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3. Crafting and Managing a Scope of Work for First-Time Rehabs

Key Discussion Points:

• Developing a Comprehensive Scope of Work: Sophia from El Paso, Texas, seeks guidance on writing a scope of work for her first rehab project, determining material purchases, and making design choices.

• Steps to Create an Effective Scope:

  • Property Inspection: Conduct a thorough walk-through or have a representative video the property to identify necessary repairs and desired upgrades.
  • Documentation: Use detailed notes and photographs to outline what needs fixing, removing, or preserving.
  • Collaboration with Contractors: Share the initial scope with contractors to obtain their feedback and adjust based on their expertise and suggestions.

• Managing Renovations Long-Distance:

  • Utilize Local Real Estate Agents: They can act as your boots on the ground, providing regular updates and ensuring that renovations adhere to the agreed scope.
  • Engage Property Managers: Some property management firms offer project management services for an additional fee, overseeing the renovation process.
  • Leverage Networking: Seek motivated individuals within the investment community who can provide reliable oversight and updates.

Notable Quotes:

• Ashley Kerr [26:30]: “I walk room for room and notate what needs to be fixed, what to demo, and what to keep.”
• Dave Meyer [30:22]: “When you are picking out finishes, like you have to not only compare to what other properties are doing but also think of like the labor cost.”
• Ashley Kerr [32:59]: “Start with the real estate agent and property manager, then finding someone that you're paying to be your boots on the ground.”

Conclusion: Creating a detailed scope of work is foundational for successful rehab projects. Collaborating closely with knowledgeable contractors and utilizing local professionals to manage renovations can ensure that projects stay on track, especially when managing them from a distance. Proper planning and clear communication are key to balancing budget constraints with quality improvements.

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Additional Resources and Final Thoughts

Key Takeaways:

• Utilize BiggerPockets Resources: Templates for scope of work and renovation cost estimation are available in the BiggerPockets Resource Hub.
• Community Engagement: Leveraging the BiggerPockets forums offers a platform to seek advice, share experiences, and gain diverse perspectives from other investors.
• Continuous Learning: Both hosts emphasize the importance of ongoing practice and education to refine investment strategies and operational skills.

Notable Quotes:

• Ashley Kerr [35:20]: “There are actually templates for rookie investors or really anyone that wants to use them in the BiggerPockets Resource hub.”
• Dave Meyer [35:38]: “They are another great resource for both rookie and advanced investors. You can ask pretty much anything you want.”

Conclusion: The episode underscores the value of thorough preparation, community support, and the strategic use of available resources in navigating the complexities of real estate investing. Whether dealing with unpermitted properties, analyzing potential deals, or managing renovations, the insights shared by Dave Meyer and Ashley Kerr provide a robust framework for investors aiming to build and sustain wealth through real estate.

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Final Note: For those seeking to delve deeper into real estate investing or looking for practical tools and community support, visiting BiggerPockets and participating in their forums can be highly beneficial. Subscribe to the BiggerPockets Real Estate Podcast on your preferred platform to stay updated with the latest discussions and expert advice.

Transcript

[Dave Meyer]

You have questions and we have answers. We found three real estate investing topics burning up the BiggerPockets forums and creating so much hot debate that we had to weigh in. Whether you're just starting out or already have a mature portfolio, stay tuned to learn from the experts. Hey friends, Dave Meyer here. Today on the show, we are answering your questions. Ashley Kare is here with me and we dug into the BiggerPockets forums and found a few trending topics we wanted to weigh in on. We'll talk about whether it's ever a good idea to buy a property that's not properly permitted, how to analyze a house hack deal so you buy your first property. Right. We'll also talk about estimating a scope of work for your first rehab and how to manage a renovation project if you're investing long distance. Ashley, I know these topics are right in your wheelhouse. Are you ready?

[Ashley Kerr]

Yeah, I am. This is like I'm taking a quiz here. Getting girl done. My rookie knowledge.

[Dave Meyer]

Yeah. Well, we are going to be grading you at the end, so. All right, let's get into our first question, which actually is doubly up your alley because it comes from someone on the forums who is in upstate New York. I know you're technically in western New York I want to properly recognize, but this question comes from Roman who's operating again in upstate New York. Roman says, I found a good multifamily home in upstate. It's a legal two unit that can cash flow $900 a month in an economically growing area. However, the house has had a new kitchen and bathroom put in without permits. This was done two owners ago and the current owner has been renting the property without issue for seven years. If I brought the property, I'd want to retroactively permit the work and get the house up to code. House is selling for 380. Even if getting the permits costs 30k, it's still a good buy. Does anyone have any experience with something like this? How much could it cost and is it a good idea? Ashley, what do you think about this one?

[Ashley Kerr]

Yeah, so going backwards into getting permits is never a fun thing to do. So luckily I haven't had to do it. But I definitely have talked to other investors who have had to rip out walls and let the inspector look inside the wall to see what the work was done. But the first thing I would start with is talking to the code enforcement person in that area. So who is actually in charge of giving out permits? Who actually goes out and does the inspection on these properties. And I would start having a conversation with them about that, because you don't own the property yet, so you want to see what would they expect to make this property permitted? Then you can kind of build your budget from there. So if the inspector says that, yes, I would come in and I would need to open up the walls to see that the plumbing was done correctly, the electric done correctly. This would be the process. So they can give you an idea of that. The next thing is to get the scope of work from the person that you're buying the house from if they have an idea of what was actually done. So. So when it says it was remodeled, was it just new cabinets put in? And, you know, no walls were ripped apart, no electric was redone, except for maybe new outlets, Things like that. Having an understanding of what the work was done can be really beneficial, too. When you go to the inspector and ask what would be the process to get this properly permitted? So some of the reasons you'd want to do this, even though the previous owner had no issues, is first, liability. Especially in New York, a tenant can sue you for anything, and if there was a fire and then you find out the electric wasn't permitted, you could end up being liable in this case. So for liability reasons, it would be good to have, you know, the work that was done permitted on the property or in the future, if you ever want to go and get a permit for something else. And the inspector comes in and says, oh, I don't have this, you know, new electric panel in the kitchen. This. You know, there was never a permit for this. This one says it should be from 1980. So going forward, getting the work corrected before you actually do any more projects.

[Dave Meyer]

In the property, to totally agree, commending Roman here for doing the right thing and getting the work permitted, because I don't know about you, I couldn't sleep if I knew there was like, something even slightly illegal or off kilter in my property. I know it happens, but I have personally gotten out of contracts for. For finding out things like this. To your point, Ashley, if the. If the scope of work's not going to be huge and it's not going to be super difficult, there's still reason to go ahead. But if it's a big thing, if it's structural, you know, I've gotten to situations where I thought it was a legal duplex and they actually just added a unit illegally. That stuff scares me away personally.

[Ashley Kerr]

Yeah.

[Dave Meyer]

Is there anything that would make you say no, that's too much? Like, if you had to vacate it, or, you know, you couldn't have tenants in it for a while. Or, like, what are some of the red flags that. That you think Roman or other people who find themselves in this situation should look out for?

[Ashley Kerr]

The biggest thing for me is if it. It's an unpermitted unit. So I actually walked a property before where it was three units, and that's what they had it listed at. But when I walked at the property, the agent for the seller said, okay, this is the deal with this. And you. You always know there's, like, some kind of catch to this. And it was that it was permitted as a duplex. So every year when they did their rental license, the upstairs tenant and the downstairs back tenant would say that they were together and they used both spaces and that they were on the lease together. So if you buy this property, you have to depend on whoever's renting those two units to lie on your behalf to the building inspector or go through the whole process of getting it permitted. And it didn't even have, like, a full kitchen. Like, there was a lot of things that would take a lot of work to actually get that permitted as a third unit. So we didn't end up buying that property. But that was, like, the biggest thing. If it's just a whole unit that is not permitted, the next thing is really finding out how deep the inspector is going to have to dig. So if there are other issues that could be uncovered, like, say they did remodel the kitchen and they did the electric, they did the plumbing, they did everything brand new. That's where I would be concerned as to, like, what are the chances of it done correctly? What are the chances of it not done correctly? And also, how much am I going to have to rip out and redo? Because, again, if you're inheriting tenants, so tenants are coming with it. The building inspector says, like, they can't live in this. It's not permitted. They need to move out. While you rip out the walls, you're going to be putting them up into a hotel unless they agree to actually go and move somewhere else. And their lease agreement.

[Dave Meyer]

I've never done this, but I'm curious what you think of this. Some advice I would potentially give to Roman is could you lock up this property under contract and get a contingency that you would permit it? And just as a reminder in the post, the question that we are responding to, Roman said that even if he had to pay 30 grand for permit costs, he'd be willing to do that. So I'm wondering if Roman writes the contract in a way and says, hey, I'm going to try and get this permit permitted. Honestly, it's a kitchen and a bathroom. My estimation is that's probably going to be fine. Like, it will probably take a couple of weeks. You say, hey, like we're going to, we're going to stretch out the closing and I will close on this in 90 days. Contingent on that, I can get permits for under $20,000 and if not, I can back out of this contract. Depends on how competitive this deal is and how many other offers the seller might have. But for me, that would be a way that you can potentially get a great deal easier conscious and make sure everything is legal and above board, but still protect yourself against the worst case scenario.

[Ashley Kerr]

And Dave, like a couple years ago, nobody wanted to do inspections or contingencies. What's your opinion on the market now? Like, are you still competitive if you put in a contingency like that in your offer?

[Dave Meyer]

It depends on the offer. I've done it this year already and people have been willing to do it. I, I think the other thing about this is now that it's sort of like legally being disclosed, the seller is going to have to disclose that this work was done unpermitted. Right. To everyone. And so this issue is going to keep coming up. So if you sort of present yourself as the reasonable person who's going to do the work to get it permitted, because the seller is probably now wondering if they're going to have to go do this so you can basically solve that problem for them. If I were Roman, I'd probably try and not pay 30 grand for it right away. But if you also express willingness to pay some amount of money to get this closed, you might be the best option for the seller. That's just general, but it obviously is going to depend on the individual market, individual property.

[Ashley Kerr]

Yeah, I think it's, it's worth risking losing the deal than finding out that it's going to cost way more than 30 grand and be way more than a hassle. And I think that was like a couple of years ago as people got caught up, especially rookie investors, new investors just wanting to get the deal and taking out that inspection, but not knowing enough about construction and about the property and then finding out problems later on. So I definitely think it's worth it, especially in this case, even if the deal doesn't work out like you're going to end up saving yourself money in the long run. Most likely, if there are issues that you didn't find out for sure.

[Dave Meyer]

Have you ever bought a deal without an inspection?

[Ashley Kerr]

A ton of them really, but that's because I'm buying them. So dilapidated.

[Dave Meyer]

Yeah. It doesn't matter that it's like the.

[Ashley Kerr]

Inspector would go in there, literally just.

[Dave Meyer]

Mark everything, be like, what are you doing?

[Ashley Kerr]

One thing you can do is like if, if you've ever gotten an inspection done before or you know somebody that's done an inspection, look at the report that they actually fill out because it's very detailed as to like every single line item, what the inspector is actually looking at. So like, if you feel you don't want to do an inspection because your offer is going to be competitive, get a copy of an inspection. When you walk the property, go through everything that an inspector would actually look at, you're obviously not going to have the tools that they do, like checking, you know, each outlet to make sure they work. Unless you want to go and buy all that stuff, but you know, checking if there's insulation in the wall. So inspectors are well worth their money, but mine just would have been red, red, red, red, red. So.

[Dave Meyer]

All right, well, great question from Roman and great advice from you, Ashley. We do have to take a quick break, but we'll be back with more community questions right after this. Before we move on, today's podcast is brought to you by Resimply the the all in One CRM built for real estate investors. Automate your marketing, skip trace for free, send direct mail and connect with your leads all in one place. Head over to resimply.com biggerpocketsnow to start your free trial and get 50% off your first month. Real estate. It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. You get these 3:00am maintenance calls, tenant disputes, property taxes. Enter the fundrise flagship real estate fund, a 1.1 billion dollar real estate portfolio built for you. We're Talking more than 4,000 single family homes in the thriving Sunbelt, 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the Flagship fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential, hedge against inflation, diversification for the stock market, all those things. Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. So visit fundrise.com/pockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] flagship this is a paid advertisement. Are you someone who tries to drive while distracted by your phone? Someone who props it on the steering wheel or peeks down at it for a glance, or just scrolls and scrolls? If so, you could be the next person to get into a fender bender, get a ticket, veer off the road, or even cause a crash that kills you or someone else. Enough already. Put the phone away or pay Paid for by nhtsa.

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[Dave Meyer]

Welcome back to the BiggerPockets podcast. I'm here with Ashley Kerr answering user questions. We just talked about whether or not we would buy a property that has unpermitted work. Next, we are moving on to a question from a first time investor from San Antonio named Tanner. Tanner asks any advice for someone trying to buy their first duplex and house hack. I currently have a pre approval and I'm shopping for properties in the 250 to $350,000 range. My plan is to do a small value add upgrades while I'm living in the property. But I'm stuck on the deal analysis. I want to be able to pull the trigger when a good deal comes along and be confident in my investment. What are the best ways to analyze a duplex house hack? Deal lot there. Where would you start with this? Because there's, there's a couple questions here. It's like how do you get over analysis paralysis? How do you analyze deals? How do you consider a house hack versus your traditional investment? What's like the first thing you would think about here Ashley?

[Ashley Kerr]

Well, how do you get good at anything?

[Dave Meyer]

Practice.

[Ashley Kerr]

Yes. So that's the first thing. Use the bigger Pockets calculators. There's already the built in worksheet going line by line literally telling you every number you need to find and where to find it. There's a little question mark so you can hover over it and you plug in the numbers. The hardest part of that is I think things you have to estimate such as insurance, not knowing exactly what your insurance would be. But you can call an agent, you can call broker, you can get an estimate, you know, just quickly over the phone. I don't think they're going to answer your call. If you call for every single deal you're analyzing and don't actually buy any of them. Not finding any policies.

[Dave Meyer]

Yes.

[Ashley Kerr]

But there's also so many websites too that you can go on now and just plug in the information and get a quote.

[Dave Meyer]

And a lot of them are within like 5 or 10%. Right. Like if you're getting a duplex in the same zip code, it's not going to be that different. You're going to be within 100 bucks per year probably. And that hopefully won't be making or breaking your analysis.

[Ashley Kerr]

Yeah. Or posting in the Bigger Pockets forums and just say hey, I'm looking at duplexes in this area. Does anybody have any there? What is your insurance? You know, you'll get responses from especially in a big city like San Antonio, you can get a good response rate as far as people can give you an idea. But there's so many tools out there for you know, how much can you receive in rent? Looking at market rent for properties. So every day I would pick a property on the mls, even if you can eyeball it and say there's no way that deal would work or it's not in your budget. Just practice, practice, practice. So that would be my first thing. Second thing is in the BiggerPockets forums you can post your calculator reports. So after you actually enter your information into there, you can save the report, post it to the forums and say, hey, what do you guys think of this? People love to give their advice, they love to criticize, they love to give their feedback, which is going to be great. It's all constructive, creative criticism.

[Dave Meyer]

Wouldn't you rather get criticized now than realize you bought a bad deal? And people are nice. It's not like people are being mean about it. They're just going to point out things that maybe you haven't thought of as a first time investor.

[Ashley Kerr]

Yeah. And then networking with other investors in the area to really like dial down your cost.

[Dave Meyer]

Yes.

[Ashley Kerr]

One idea I had when you were reading that question was if you feel like the numbers aren't working, is what about the unit that you're living in? Do you have the option of renting out those bedrooms also so you can bring in more income? So now you have a little less risk because there's more income. Your mortgage payment is still the same, your expenses are still the same. So if you have the option of renting out one side of the duplex and then also renting out your bedrooms, you can increase the rental income and then you know you have more leeway if your numbers aren't exactly correct because you're bringing in more income on the deal.

[Dave Meyer]

Yeah. Those are things that you can mess around with to try and get your analysis really crisp and sort of to maximize your return. So this great advice. I also just want to sort of take the high level, sort of philosophical part of this question just for a minute because I think when you, when you're talking about buying your first deal, a lot of it, yes, you should absolutely get really good at deal analysis. There is no substitute for that. You can't get around doing that. But just remember that if you are house hacking and it is your first deal, this doesn't need to be like some grand slam deal where you're making amazing cash flow and everything is perfect. When you're house hacking, if you can just reduce your living expenses by any considerable margin, that's a win. Right. If you were spending 1500 bucks a month on rent and now you're still paying 500 bucks a month in living expenses. It's $1,000 a month that you're saving. That's essentially generating $1,000 a month in cash flow. I actually collaborated with Scott Trench. We built a calculator that's like buy, rent, house, hack. And so that's free. You can go to biggerpockets.com resources and get that for free. But I recommend just thinking about it in that in those terms, like what is going to be the best outcome for you financially over the next couple of years? For most people in most markets, it's going to be house hacking. That's not true in every market. But in a market like San Antonio that's relatively cheap, I'm almost sure that buying in this 250 to 350 price point is going to do better for you than either buying a primary residence or renting. So I think just making sure your expectations are appropriate are really important, especially for this deal and for house hacking. I also just want to underscore what Ashley was saying about practicing, because I think a lot of people kind of scoff at that and they don't want to go do this. But when you were saying that I was doing this yesterday, I was practicing deal analysis. I wrote a book about deal analysis. So experienced investors do this stuff too. Whether you call it practice or just looking at deals, it's the same thing. Just look at as many deals as you possibly can and you'll get good at it.

[Ashley Kerr]

Agree with that so much. I can't even tell you how many BiggerPockets calculator reports I have saved in my portfolio from like the last 10 years.

[Dave Meyer]

So many.

[Ashley Kerr]

But now it's gotten to the point where in a very, very specific market, in a very specific duplex, I can eyeball that and I can analyze it like this. Like I can run those numbers in my head because I've done so many. And that gives you such a competitive advantage that you can make decisions quickly when a deal comes up. As to yes or no. And obviously there's more that goes into it than just eyeballing it. But you can move faster and you can move quicker when those deals come across. And I think that, like building out your buy box so you're not wasting time analyzing deals that you don't even know how to operate or manage. But they look cool because you heard a podcast about them. But really building your buy box and then just exercising that muscle of analyzing deals in that market of what you want to buy, and you'll be able to move quicker and faster and luckily.

[Dave Meyer]

It'S not even that hard. You do need to get a feel for it over time and you do get better at it, but even the first one shouldn't be too hard. And over time, you'll be doing this in like five minutes. It's really just not that difficult. So. Great question, Tanner. You should know that this is a common place that almost every real estate investor finds themselves at some point in the beginning of their investing career. And it just takes that, that commitment and practice and diligence and you'll get there. You know, Ashley and I are no different than anyone else. We were in the exact same spot. So just stick with it. All right, that was our second question today. We do have to take a quick break, but when we come back, we'll talk about a first rehab, how to set the scope of work, how to manage your contractor, and how to even do it long distance. We'll be right back. Real estate. It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. You get these 3:00am maintenance calls, tenant disputes, property taxes. Enter the fundrise flagship real estate fund, a $1.11 billion real estate portfolio built for you. We're Talking more than 4,000 single family homes in the thriving Sunbelt, 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the flagship fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential, hedge against inflation, diversification for the stock market, all those things. Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. So visit Fundrise Dot Pockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the fundrise flagship fund before investing. This and other information can be found in the fund's [e-mail] flagship. This is a paid advertisement.

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[Dave Meyer]

To the BiggerPockets podcast. I am here with Ashley Kerr answering user questions. And this third one is one I'm particularly interested because I'm actually dealing with some of these questions myself. All right, let's move on to our next question, which comes from Sophia, who is investing in El Paso, Texas. My husband and I are looking to do our first rehab, and we were wondering how to write a scope of work and determine what material to buy. Does this all come from the general contractor? How does one define design choices? And if we don't live in the city, who is a good person to check in on the construction so we don't have to go every week? Is it our property manager or is it the general contractor to keep us posted? I am very curious to hear your thoughts on this, Ashley, because I am sort of going through this a little bit myself right now and learning some of the bigger scope of work renovation myself. So you've been doing this for a couple of years now. How would you approach this question?

[Ashley Kerr]

The first thing is I always walk the property first. I want to know, like, what's going on in there. And if you can't physically walk it, have somebody video, do a video the whole way through. And then pictures. So you're going to take pictures like they're walking through the property. Here's the door I'm walking in. Then here's this side, this side, this side. Go through the whole house. Almost like you're walking through a picture to picture, just because pictures are easier to zoom in than on video. I do pencil and paper. I stand there and I stand in the doorway of the mud room, and I'm like, this needs to be fixed. This needs to be fixed. And even if you know nothing about construction, you can still eyeball something is wrong. Like the trim is falling off. There's a hole in the drywall. The closet doesn't have like a rag, so, you know, you can go through and just write down the things that you see. I also notate what I want to get rid of. So if kitchen cabinets are getting ripped out, I don't want them to demo that. And then I also notate what is staying. So, like, maybe there's unique wood feature of like some cabinet or something that's built in. I would mark that, that that is staying, not getting demoed. So I do that and I walk room for room. And it does take a while. Then I go and I sit on my computer and I type it all up into a nice thing. Then I take that scope of work and I send it to my contractor. My contractor walks the property, so he takes my scope of work and he basically gives his feedback and, you know, makes changes to it or makes suggestions. So the one flip I just did, when my contractor walked the property, he called me on the phone and we went room by room and he's like, okay, I see here, I think that instead of putting like a regular bathroom door on, you should actually do a pocket door. He's like, there's not a lot of room anyways. Like, we can make it a really nice door. So it's like a feature stuff.

[Dave Meyer]

So like everyone loves a pocket door.

[Ashley Kerr]

Yeah. So he gives lots of, lots of good feedback and then from there I change the scope of work based on his recommendations that we agree on.

[Dave Meyer]

How would you go about thinking through the scope of work to make sure that you're providing safe, good, comfortable home that's going to generate rents, but you're not sort of over developing, over improving a property that's going to be rented out?

[Ashley Kerr]

So I learned this from good old James Danard from on Market podcast. Of course, we all have look at the comparables. So like, the property I did, it was 1100 square feet. It was three beds, two bathrooms, and one bathroom was in the basement. So it wasn't even that great of a selling point. But we went through and looked at other properties that had sold in that area as far as what was the expectation, what properties got a little bit more than other ones. And why was that? And like, for this situation was because the, the kitchens were updated. So we ripped the whole kitchen out, did everything brand new in the kitchen. And that was a huge selling point of it. So looking at comparables, what have other properties sold for? The really hard part I think is matching my design with what the contractor wanted to do or what was easy. So the tile, I wanted the tile done a certain way in the bathroom and the contractor said, no, this is going to take me so long to actually do because of the way it's laid out. The tile that you picked out, and we went and had to revise that. So that's where you know, you have to have the understanding with your contractor too is like some of these details and finishes that I want, what's the actual labor to complete them too? When you are picking out finishes, like you have to not only compare to what other properties are doing, but also think of like the labor cost for some of those finishes that you're picking out too.

[Dave Meyer]

And would you say the same thing if you were trying to figure out what something will rent for.

[Ashley Kerr]

Yeah. So what I used to do for a long time was I started an Excel spreadsheet and every day I would pull up the market I was in and look at what properties were listed for rent. I would enter them into my Excel spreadsheet. This was very tedious, but I was very motivated. If you really want that deal, you will do this.

[Dave Meyer]

Yeah.

[Ashley Kerr]

And every day I would check. And if a property disappeared and was no longer listed, I would mark it as rented. So if it rented within a week, two weeks, most likely it rented for what they were asking. And right now, in my market, there's no negotiation. Like, properties are renting like this as soon as they're listed for what they're asking. So, yeah, that's tracking what things rent for, but then also calling property management companies or like apartment complexes in the area. A lot of websites like apartments.com, a lot of the complexes will keep listings up. Even if there's not anything available will still say what they rent for. So if you're like me and you feel uncomfortable calling people, you can just call and say, like, oh, I'm looking for an apartment with your two bedrooms. Go for. Even if they don't have any available, they'll still give you the information. I did have an investor call me before and say, hey, I got this property I'm going to be renting out. It's right across the street from you. Just wondering what you got, what you're getting for rat and things. And like, he was completely honest as to, you know, I'm your competition now across the street. What are you renting for?

[Dave Meyer]

Well, I want to get to the second part of this question because this is something I've been thinking about personally. And just as a reminder, Sophia had asked about doing their first rehab. I don't know if it's out of state, but it's long distance. And basically Sophia asked, who's a good person to check in on the construction so we don't have to go every week? Is it the property manager? Is it the general contractor to keep us posted? I'm curious about this because I've done, I guess it would be a medium scope for long distance, but it wasn't like a huge renovation. And I've sort of been hesitant to do a bigger renovation largely because of this question, because I trust my property manager, I trust probably the contractor, but in my opinion, like, everyone needs to be managed. And that's not a knock on the contractor. But I just whether it's A contractor, property manager, anyone. I wouldn't rely on someone to self report their own competence and progress. There's got to be a third party. Right? And so how would you handle this situation? Would you just fly there yourself? Would you maybe pay the property manager? Because it's not really the property manager's job, like.

[Ashley Kerr]

Right.

[Dave Meyer]

You know, how would you go about this?

[Ashley Kerr]

I would start with the real estate agent. So if you purchase this property using an agent, I would ask them if they would be your boots on the ground and you could pay them extra to go and actually walk the property, send you video, things like that. Where I maybe wouldn't do that is if you got your contractor from the real estate agent. So if they were the ones that referred them recommended, so they work with them on a lot of houses and things like that, then maybe I want it because you kind of want that checks and balance. So the property manager, I would ask if they would do that, whatever what the fee, the cost would be to add that on. Because even when we had a property management company when they did turnovers, they still charged a project management fee on top of them doing the turnover. So they would probably maybe charge you a project management fee fee. You could also ask if there was anybody in their office that would want a side job of going to your property once a week, doing an update, things like that. Being cautious of meeting people online, but posting online and asking if there's anybody that lives in that area that's maybe a college student, another investor, they want to get started investing. Maybe they have a duplex themselves. There is that level of like not really knowing the person and you're trusting them to go into this house and things like that. So that's where I would start. Start with real estate agent and property manager, then finding someone that you're paying to be your boots on the ground. And I would definitely find someone that's motivated and excited to be learning about real estate. And you know, they can see the whole rehab process. You can share with them when it's costing. So they're learning if they want to invest in that market. So those would kind of be the three people that I would go through.

[Dave Meyer]

But I agree with you. I think finding someone who's like, wants to learn the industry, they're going to be curious. Like, if I had this job when I was in my 20s, I would have loved it. I love going to houses. I would have just like liked walking around and just talking to the contractor and just taking pictures because you're just learning and so there's people like that in every city. So I'm sure whether through Bigger Pockets, through a meetup, whatever, you could be able to find that. All right, well, those are our three questions for today. Ashley, thank you so much. Any last thoughts or advice here for for our audience?

[Ashley Kerr]

Well, first of all, a lot of the things actually talked about, like building your scope of work, estimating rehab costs. There's actually templates for rookie investors or really anyone that wants to use them in the Bigger Pockets Resource hub. So you can go to biggerpockets.com rookie resource to find that.

[Dave Meyer]

Awesome. Definitely check that out. All these free resources on Bigger Pockets, making your life easier as an investor. So don't forget to check those out. Thank you all so much for listening. And just as a reminder, we found the questions that Ashley and I discussed here today in the Bigger Pocket Pockets forums. They are another great resource for both rookie and advanced investors. You can ask pretty much anything you want. You can get great, valuable advice, connect with other people in your market. So check that out as [e-mail] forums. Thanks again for listening. We'll see you next time. Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian Kay, copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember, past performance is not indicative of future results. BiggerPockets, LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.