Let us hear from Jay Conner’s guest Van Sturgeon, the biggest challenge of new real estate investors when they are working on their first rehab. What are the most common mistakes they are making and how to prevent them?
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:
I know you can speak from experience when I asked you this question and I know you can speak from observing other people. So, when someone’s a new real estate investor, from your own experience and from other people you’ve observed, what would you say the biggest challenges are when they’re working on their first rehab? And the second part of that question is, where do most people mess up based on your experience?
Van Sturgeon:
Well, there’s a variety of mistakes that I see new real estate investors make in their first purchase. And look, when we’re buying property, we’re not buying these beautiful emeralds or diamonds. We’re buying diamonds on the rough. These are ugly ducklings that, hopefully, we’ve got a great deal on. And ultimately we need to infuse some type of renovation, repair, rehab in it to raise the value. And then the ironic part about the whole process is when you take a property, you, literally, gotta decrease the value of the property by ripping it apart, throwing more money into it, to be able to reach back to the very minimum that you purchased it for, but then raise the value. And so through that whole process, there’s a lot of fear and there’s a lot of apprehensions that real new real estate investors have because you’re talking about, literally, tens of thousands of dollars being spent.
Van Sturgeon:
And there’s a lot of apprehension through the whole process because you’re, literally, tearing things apart. So one of the things that I find that the biggest mistake new real estate investors make is really in not sitting down and actually writing down what their goals are. What is it they’re looking to accomplish with this particular property? You can’t go Willy Wally all over the place on it. You actually have to sit down and write down what it is you’re looking to accomplish. If it’s a rental property, what’s the rental rate you want to get? Do you want to get $800, $1,200 a month? If you’re looking to flip it, how much money are you looking to make out of that flip? You got to write that goal down. And because it is through that goal, the whole process of planning and managing that renovation rehab is going to flow through that goal. Then the actions that we’re going take.
Van Sturgeon:
The steps that we’re going to take are going to flow through that goal. So once you establish that goal, you got to go out there in the marketplace and validate it. And often I find new these new real estate investors, don’t go out there to really do their due diligence, to find out if they’re looking to rent that apartment out or a house out for $1,200 a month, what is it that’s in the marketplace that they need to create or need to do to their property in order to be able to get that $1,200? Or if they’re looking to flip it, what is it that they need to do? And you got to get out there, you gotta do so. You got to get out there and you got to knock on doors. You got to look at it and some of you can do it off of the internet, but you also need to go and visit properties to get a sense of what the neighborhood is like, and what is the value needed to put into your property, or to get to that goal once you’ve been able to do that.
Van Sturgeon:
The final really thing that I really want to get into with you, Jay, is I find that new real estate investors don’t get into writing a scope of work. And the scope of work in my field wherein the commercial side, there isn’t a job that I’ve quoted on that doesn’t have a scope of work written where it details exactly what it is that needs to be done to that property. It specifies the appliances, the coloring, everything that’s associated with that renovation or rehab. On the residential side, very rarely do I come across people actually going through that. So that’s another huge mistake that a lot of new real estate investors make is they don’t go into the minutiae and actually detail what it is they’re looking for.
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