How do you set up a renovation goal? Is it more beneficial to set up a renovation goal before you go under contract? What are the processes that a real estate investor should go through when establishing a renovation goal?
Van Sturgeon is an experienced entrepreneur of over 30-years who has successfully created several businesses in the real estate industry that cover land acquisition, development management, construction, and renovation.
Van personally owns over 1,000 properties across North America and is semi-retired from the day-to-day operations of his businesses.
He shares his passion for helping homeowners and real estate investors overcome their fears of house renovations/rehabbing, and he loves to be actively involved in helping people reach their goals.
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Jay Conner:
You mentioned a moment ago setting a renovation goal, in other words, What is it you want to accomplish with this property? Do you recommend setting that renovation goal before you go under contract? Before you close? What’s the timeline through the process that the real estate investors should go through the renovation goal or establish the goal?
Van Sturgeon:
Well, both actually. I think that’s in the process of you trying to determine whether a property is a deal, you got to have a good sense of what’s out there in the marketplace and compare that to what market value is. But once you’ve actually acquired a property, put it on contract, then you really got to fine-tune that goal and really make sure that if you’re going into the property, looking to flip it, then you need to actually go out there and validate that with what the numbers are and what is it that you need to do this property in order to be able to get to that dollar value. So if you’re looking to make $40,000 on that flip, well, you got to go out there, figure out what it is that you need to put into this property to get to that $40,000.
Jay Conner:
You bring up a really, really good point because with every property, as far as single-family properties go, we always have multiple exit strategies that we can choose from, right? So for example, case in point to what you’re talking about, Van, I personally went and looked at a house last night at 6:30 PM after my wife, Carol Joy, and I just flew back in from Ketchikan, Alaska. Time to go look at houses, right? So I went and looked. Well, my contractor had already looked at it, and if I’m going to flip the house and get top retail, it’s going to take almost $30,000. Well, the numbers aren’t going to work to do that. So my other strategy upon looking at the property last night was, “Well, wait a minute. Can I buy it subject to the existing note, using the seller’s mortgage and sell it on a rent-to-own and not touch the house?”
Jay Conner:
Can I just sell it out on rent-to-own and not do it? And when I went and looked, now I can get the numbers to work. We just got to negotiate with the seller for them to take our offers. So I just wanted to give a little color to what you said. As part of that renovation goal, knowing what’s the exit strategy you want to have, it’s always very helpful in my experience to have backup other exit strategies you can look at instead of just being pigeonholed into one. Like if my only exit strategy is I got to make this house absolutely drop-dead gorgeous and sell it at retail in the multiple listing service, I’m going to miss out on some deals. Would you agree with that?
Van Sturgeon:
Absolutely. And it goes to show you experience goes a long way. Absolutely. I never go into any property purchase without having multiple exit strategies on that property or whether it’s on the renovation side or whether it’s an actual acquisition itself and how to structure that. Like, there are situations where I purchased property, where, for whatever reason, I got in too far into something. And then I’ve had to transition into actually creating something, some other value. For example, finishing a basement, turning that into an in-law suite where I can rent the basement out and rent the upstairs separately, adding additional rental income. These are the types of things, or if there’s additional land on that property, separately selling that parcel of land, adding value to the whole transaction. Those are the types of things that you’re talking about. And I totally agree. You gotta do that. You gotta have multiple exit strategies.
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