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Comparing Rehabilitation Expenses and Weighing Renting vs. Owning: Is This the End of Real Estate?

Could the end of real estate investing already be upon us? How do you know how much to spend on a renovation before buying a house? And is a negative cash flow rental EVER worth investing in? On this Seeing Greene, we’re answering the tough questions you’ll be forced to ask in a hard housing market so you can build wealth while the masses run for the hills. Thankfully, David has his co-pilot on this episode!

David and Rob are back to answer YOUR real estate questions, EVEN if you’re too scared to hear the answers. On today’s show, a live caller asks, “How do I get a renovation estimate BEFORE bidding on a BRRRR?” If you’ve stressed over which comes first, the bid or the buy, stick around. We’ll also touch on negative cash flow and when it makes sense to buy a rental that’s losing money every month (there’s a science to this). Then, for all you doomsayers, David and Rob give their take on what happens when the population declines, and no one is left to rent houses. Finally, we answer the age-old question, “should I rent or buy in today’s market?”

Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can jump on a live Q&A and get your question answered on the spot!

David:

This is the BiggerPockets Podcast show, 840. What’s going on everyone? It is me, David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet for a long time, bringing you what you need to know about real estate to stay up to speed, current, and in the know of what’s going on in this market, which is changing now, more than ever.

In today’s episode, Rob Abasolo and I will be handling it, Seeing Greene style. Now, normally there’s a green light behind me. That’s not the case right now because I am traveling to promote Pillars of Wealth, but that doesn’t stop us from bringing you educational, powerful and free real estate content.

In today’s show, ooh, you’re going to love it. We get into sequencing the work for rehab projects. What is the order that you should do when it comes to getting pre-approved, to getting bids on construction, ratting offers, moving forward with the escrow and strategies you can use to put that in your favor. When cashflow is or isn’t appropriate, this is a really good discussion about the complicated question of, is it okay to cashflow negatively if I’m making a lot of money, and what needs to go into that question?

With the aging population, is real estate a risk long-term? I thought that was a really good discussion that we had as well. Rob, what are the factors that make real estate go up or down in value, and what will that be like in the future if the population of America stops increasing like other first world countries have? And can I own real estate while still renting where I live?

All that and more on today’s show. But before we get to our first question, today’s quick tip is simple. Get your team together, build your core four, and start your journey and BiggerPockets can help. We’ve got an agent finder, which you can find at biggerpockets.com/agents. I’m one of the people on there, so go look for me as well. You can find an agent in your area and ask them if they can help you put your core four together. If they know what that means, it means they probably read my book and you’re off to a good start. Rob, anything you want to say before we get to our first question?

Rob:This is very fun. This is a very fun format. I can’t believe I’ve been missing out on this for two years. Thank you for allowing me to come on this. I want to do this more. Have me on.

David:First time you’ve ever put me and fun in the same sentence.

Rob:Hey, there’s a first time for everything and there’s a second time for everything, too. So if you hold out, maybe I’ll say it again.

David:The only time people really talk about me being fun is when I’m talking about fundamentals, which people think are fundamentally boring.

Rob:That’s the name of your 11th book that you’re currently writing for 2027, right?

All right, let’s get into the show.

David:Sean, welcome to the show. What’s on your mind today?

Sean:Thanks, David. First of all, I’d like to say thank you for taking the time to have me on and answering my question. You and Rob have been instrumental in my decision to get into real estate, so it’s really quite surreal being here and talking to you both live, so thank you.

Rob:Oh, hey, happy to do it.

Sean:A bit of relevant background. My cousin and I have teamed up as partners. He is an investment banker living in New York City and I’m a corporate lawyer living in Boston. We have leaned into the concept of long distance real estate investing, given our expensive local markets. We own a couple of properties and want to continue building our portfolio. And we’re looking to enhance our returns on future investments by employing the BRRRR strategy and we are working with an investor focused realtor in an out-of-state market we have selected.

Our skill sets are great on the transactional and analytical sides, but we have little to no experience in renovation and construction, and any BRRRR investment would be made from afar. So we do not have the ability to see properties firsthand, which leads me to my question. Could you explain the sequencing of arriving at a renovation estimate for a BRRRR? Do we try to get contractors to the property and provide bids before we submit our offer? This would provide surety for our offer, but I can see it being hard to send contractors out for every property we want to offer on, particularly if you want to get bids from multiple contractors.

Alternatively, if we cannot get contractors to the property before making an offer, what should we do as inexperienced rehabbers to inform our renovation estimate without a bid from a contractor? We found that given the increasingly slim margins in the current market, picking the wrong end of estimate range could mean the difference between a good deal and a bad one. Any help is appreciated. Thank you.

Rob:Sure, yeah, yeah. So David, I’m going to let you jump in on this one first. You actually answered this not too long ago because I had this question, if you recall, where I was like, “Well, do we get the offer accepted first and then get the contractor? Or are we trying to get the contractor first and then get the offer accepted?” So you provided some pretty good insight. Can you let us know what your process is?

David:I love these questions. Why can’t everyone ask me a question that’s simple as, what’s the system or the sequencing? It’s always like, “What do I do because I don’t know what the market’s going to do?” And you’re like, “Well, great. Now I have to try to dive into that ocean of confusion.” This is really easy. Let me ask you before I answer that, Sean. Did you have chat GPT help you formulate that question?

Sean:No, I did not. I’ve listened to your takes on AI and I agree with you. I wrote that myself.

David:So you are AI. Dude, that was really good. Anytime someone has to ask you if AI helped you write it, that’s saying that you sound too good as a human to be believed. Are you married?

Sean:I’m married. I think it’s the corporate lawyer in me coming out.

David:Yeah, that’s not surprising either. Tell your wife that she married the pinnacle of masculine perfection, at least when it comes to the written word. She’s a very lucky woman.

All right. So to simplify this, you’re asking here, do I get a bid from a contractor…

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