Analysis Paralysis? Here’s how to REALLY estimate Renovation Costs

Mike DeHaan: [0:02] On Air Brands.

Speaker 2: [0:07] Welcome to the collecting keys real estate investing podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:30] What's going on, guys? Welcome to episode 32 of the collecting keys podcast.

Dan Austin: [0:37] A lot of energy in that one. Came out hard.

Mike DeHaan: [0:40] I'm happy to be back. We've been off for a little bit.

Dan Austin: [0:42] Yeah.

Mike DeHaan: [0:43] You know, thanks for bearing with us last week as we gave you the audio from one of our YouTube videos. We're gonna be doing some of these YouTube videos on, I guess, the collecting keys Mike and Dan show. Over the next little bit, we're gonna dive more into topics regarding, you know, the economy, business, just like other real estate people in general. We have another one coming out here pretty soon where we talk about a recent bigger pockets episode where they discuss wholesalers and wholesale and real estate wholesaling as a whole in a way that they and I don't necessarily agree with. So we'll have we'll have things like that. We'll go into a lot of visuals in those, but they do make it audio as well. So if you enjoyed that, go and check out our YouTube channel over there. I think if you looked up the collecting keys YouTube channel, there should be some tees on there, and then there should be the collecting keys Mike and Dan show YouTube channel as well. So

Dan Austin: [1:34] Is that the name of the channel? Yeah. Collecting keys Mike and Dan show?

Mike DeHaan: [1:37] I believe so. Yeah. I mean, what I think it's Mike and Dan Show, Collecting Keys Network. I'll I'll put the exact link in the description Okay. So you can see it. But, yeah, you know, we've been off a couple weeks. I was at a GoBundance event in Miami last week through the weekend. And, you know, GoBundance, some Millionaire Mastermind that Dan and I both joined last year. It's one of those things that kind of got on our radars from, you know, BiggerPockets and some of these other, I guess, like, podcasts that people talk about. And essentially, what is it's a mastermind for, you know, people with a certain net worth requirement and, you know, generally have businesses going on, generally have high incomes of some sort, and they want to get more out of life as well rather than just being workaholics. And I always you know, when we sign up for those things, I mean, it's kind of an expensive cost, but I know you haven't even been to an event, Dan, but tell you what, after every time I go to one, I always come back with, like, church camp syndrome, you know, like, either right or wrong.

Dan Austin: [2:38] I know. I know. It's probably good I haven't because both of us going at the same time would be in our employees would be in trouble. But it's it is interesting group because I haven't and I think the events are probably I don't know. I'm just gonna throw waiting out there, like, percent of the value. And then 3030% is just being in the group and having your GoPod, which is a smaller group of people that you meet with on a more, you know, a a different cadence, probably weekly or biweekly, depending on your group. And you could have multiple GoPods. But, you know, a lot of people in GoBundance have talked about it on various, you know, media platforms or whatever. And it really is, like, what they say it is. It's pretty life changing. Mhmm. Changing your perspective. Finally, getting around other people that have big visions that aren't holding you back, that are supporting you, and also not thinking about just money. But everybody in the group knows money makes things a lot easier, and they're motivated by that metric, in many senses, but that's not the only metric. And so it definitely keeps you well balanced in that approach as well. So it's a pretty it's not a GoBundance pitch, by the way, but it's definitely one of those things you can join a group and all these masterminds, do all these things. It can it truly has been pretty mind altering for me.

Mike DeHaan: [3:47] Yeah. And and, I mean, especially as you start to get into business and you start to have some success, I'm sure you found this. A lot of people find this is all of a sudden your social group normally within your your local environment. You still connect with them quite as well when they're all, you know, working salary jobs and they're bitching about stuff that you can't really relate to anymore when you're in the entrepreneurial struggle train, which is completely different for better or for worse. You know? And then there'll things come up like, you know, you're hanging out with your friends, you gotta go take a sales call because that's what you gotta do to operate your business, and they give you crap for it. And, you know, they just don't understand. But then when you're in this environment where you're with a bunch of other people that do understand it, yeah, it's definitely super mind altering. The thing that I like about GoBundance as well is there's a wide range of people, but we all kind of are on the same wavelength just with life. You know, and there's like wide range being between, you know, age, demographic, the businesses that they're in. But everyone there, because it's sort of set up with this expectation of like, hey, we kinda want more out of life. Like, we wanna network. We wanna do all these things. It's very easy to get along with pretty much everybody. Right.

Dan Austin: [4:53] A lot of common interests there.

Mike DeHaan: [4:54] Yeah. Tons of common interests. And, I mean, every like, the range of people, lots of real estate guys, as you'd imagine. I mean, it's one of the easiest ways to reach sub figure net worth. That's why we started our instant investor program was to sort of teach that because that's how we were able to achieve it. You know, when especially when you're buying discounted real estate, it happens quickly, which is what a lot of guys that are doing. But then there's everyone from, like, people that are in tech. There's, you know, people that have medical practices. In Miami, we have, there's a couple of professional athletes that were there that are also trying to now establish business stuff as their, professional athletic careers are coming to an end. There's, an NBA player and NFL player, both of which are you know, have played professionally for fifteen to twenty years. And they're like, yeah. Now I'm just trying to figure out what I'm doing with the rest of my life. Mhmm. And I wanna do it in a way that's outside of, you know, the typical realm of what a lot of those guys do, which is going become broke. So Right. You know, like, it just super, super cool that that wide range and, you know, the networking that comes from that is so invaluable. I mean, you know, we we met, like, our podcast producers there that are helping us put together these episodes. The owner of that company is part of the the group. We met the guy that we worked with to start building out the instant investor program with that group. We have several people who've done partnerships on deals in that group.

Mike DeHaan: [6:10] I mean, you know, even though the the price tag was $10 a year, I mean, we've made that money back significantly.

Dan Austin: [6:16] Oh, man. Within, like, the first months. Like, it's it is amazing how fast. Like, you know, every time you gotta make your tuition payment, you're like, oh, god. That's a lot of money. But then you look at what you've made because of it. Not just in financial gains, but other gains as well. Mindset for me, a huge mindset gains in being around other people, with with the mindset I wanna have. And Yeah. I heard, Jamie Gruber, who runs the tribe of millionaires podcast, Forgo Abundance, he did his latest episode for Miami, I think it was, and and he said nobody has time to be in GoBundance, so you have to make time to be in GoBundance. Yeah. That's true. So true, though. Like, anything you do, it doesn't have to be GoBundance. It could be our instant investor program. It could be anything. But if you truly allocate the time and the effort to that and when you have to pay money for it, you're more incentivized to because you don't wanna, like, have that thing be a waste of your money. But when you do allocate that to it, you can reap the benefits. The more you pour into it, the more you get out of it.

Mike DeHaan: [7:09] Yeah. I mean, yeah. Actually, just like everything else. Yeah. I met Jamie too. He's he's a he's a good dude. I'm actually gonna be on that podcast here coming out in June or July. I recorded while I was in Miami. It was pretty cool. So I I recorded that one, And literally right across from us, can probably hear his voice in the background of ours, Jay Scott from Bigger Pockets was recording. Oh, yeah.

Dan Austin: [7:30] He's in GoBundance too. Right?

Mike DeHaan: [7:32] I actually don't know if Jay Scott's in GoBundance, but he was there to record episodes for his new podcast. He was he was recording with a lot of guys. He didn't pick me, unfortunately, to be recorded. But I got out with him a little bit. Super nice guy. But yeah. So the the Gliaths can listen out for that too as it comes. I think that was a good episode where we have some announcements on stuff that we're working on that are gonna be revealed there, I guess, if we

Dan Austin: [7:54] don't Big announcements.

Mike DeHaan: [7:55] But yeah. So anyway, yeah, that's good.

Dan Austin: [7:57] And play it on ARPA. Maybe we could do, like, a midweek episode, drop that episode on the Collecting Keys Network and yeah. That'd be cool.

Mike DeHaan: [8:05] That's good idea. Yeah. So, anyway, yeah, not a GoBundance plug, but we've had great experiences so far. And if you guys do go and inquire about it, tell them we sent you because we'll get a kickback when you sign up.

Dan Austin: [8:16] Oh. Oh, yeah. Gonna get that referral fee. It's really not a very large referral fee. So

Mike DeHaan: [8:22] I mean, it's not it's it's pretty significant. It's, what, $500 or $750 or something. I mean,

Dan Austin: [8:27] it's not But, I mean, that's not the incentive to get people into the group. You still want badass people in the group. Right?

Mike DeHaan: [8:32] Yeah. Yeah. Well, I mean, they they they still interview you, and you have to qualify for it.

Dan Austin: [8:36] That's true.

Mike DeHaan: [8:37] Good point.

Dan Austin: [8:37] Just go and

Mike DeHaan: [8:38] sign up for it. But Yeah.

Dan Austin: [8:41] Yeah. Anyhow, yeah, what's your what's your biggest takeaways? Like, what do you what do you what you brought it up for a reason. Like, what do you wanna what did you what did you think about it?

Mike DeHaan: [8:47] Yeah. I mean, my biggest takeaways are always, you know, I always have a level of inspiration coming back after being around a bunch of like minded folks. And then the speakers that they had in Miami, I really enjoyed. So, like, the first first night, they had this guy. It's like, what's the name? Ryan Serhant. He's like the he's a host of a show called millionaire million dollar listing. So he sells super high luxury real estate. And he's he's like, sells, like, $100,000,000 houses on the East Coast, just just insane. That's his specialty. And he had a whole thing about branding, which I thought was really interesting. And how he got, into selling these extremely exclusive houses wasn't by any form of, like, marketing or anything like that, but he he had his brokerage that was just called, Serhant. And he was like he's like, you know, there's all these people that want, you know, luxury, like, treatment. Right? Because they're extremely high net worth individuals. So they made Serhant signature, and that was their brand. And they literally just added it as, like, a logo on their website. And within a couple of weeks, people were calling them being like, oh, I heard that you, work exclusively with high net worth individuals. And he's like, well, yes, we do. He's like, had no, nothing was different, right?

Mike DeHaan: [9:58] It's all branding. It's all personal brand. So he had that. And then that was super interesting to hear him talk about, you know, that sort of side of it and how, you know, your personal brand and your business brand and how valuable those are to growing literally anything. And then the second day I really enjoyed. So we had Jeff Hopkins who's the was the CEO of Priceline when they went public back in the early two thousands. And he's since taken like five or six different businesses public. He's worth like $10,000,000,000 or something crazy. And, you know, he just came to this talk and just talked about hiring and building teams. And it's one of those things that you finish it up and it makes you think because, you know, people say that you always have the same amount of time in the day as everyone else, which, you know, based off your net worth, obviously, if you have billions of dollars, I hate to say it, but you do have more time than everyone else because you can just outsource literally everything. Or if, like, you know, the the mother of two who's single and has to take a bus to and from work, I she does have less time than everyone else, let's be honest, which makes it challenging. But he was also someone that was so motivated and organized that he told a story that he just, like, threw this in the casual conversation in the in the speech. He's like, yeah. So after I took my third company public, I decided to, take about eighteen months off and got into music. And, I happened to win a Grammy that year, and that's when, I was like, what?

Mike DeHaan: [11:20] You just decided to, like, get into music and go win a Grammy? How the hell does that even happen? Does it make any sense?

Dan Austin: [11:26] Yeah. Oh my gosh. That yeah. That would not be me.

Mike DeHaan: [11:29] No. Right? Everybody uses that kind of person. And, you know, just listening to him talking about scaling and organizing and how to manage staff and teams and how key all that is was super interesting. And he talked about his his most successful moment where he realized he had reached sort of, like, peak with his business was when he was in the office and he had nothing to do. But not only he had nothing to do, but he's a workaholic. So he was walking around to all of his team leaders trying to find something to do, And they all kept telling him to leave because he was in a way. And, like, every single one of them just said, don't you go play golf or something? Why don't you go play golf or something? And he was all pissed off because everyone that worked for him in his business just wanted him to leave and go play golf so they could do their job and they could grow the vision they had all bought into. Right. And he's like he's like at the time, he was really upset about it. But in hindsight, he's like, that's awesome. You know? To have that sort of culture and that sort of team built is really something remarkable.

Dan Austin: [12:30] That is

Mike DeHaan: [12:30] remarkable. You know? And how much of that is good for his TED talk or whatever? I don't know. But either way, this is still a really interesting speech. And when you go when you're around, like, high level people like that who are professional grade speakers, you know, it's hard not to get somewhat inspired.

Dan Austin: [12:47] Well, and I think, one one key point here too is is the audience in these these this environment, and how you what you take away from those. Because it's easy to go and listen to that and walk away all pumped up. But, like, what you know, the action you take after that, I think, is super important. And, one thing I was, living vicariously through the GoBundance, Facebook group during this, and and one of the GoBros posted some of his slides that he created for himself as, like, takeaways. And I thought they were super valuable. And this kind of speaks to one of them is, like, how do you prepare for this type of event? But in general, I I I looked at it as, like, how do you prepare for kind of anything you're gonna do? And first is, like, looking at what is it what are the problems you're trying to solve? Like, really, truly, like, categorize those. And then when you're in that meeting or you're in that event or whatever, being inquisitive and inquiring and truly listening and seeking out solutions to your problems, and then immediately afterwards is actually taking your action steps. And what are those action steps that you for those problems you were going to solve? I think that's just super valuable and being intentional in that. That's how you you go from, you know, zero to a 100 way faster than the average person. It's really being intentional about those action steps.

Mike DeHaan: [13:58] Yeah. And you you haven't been to an event yet, but they actually make you do that at these events. So it's funny. While the speaker's still there, the CEO of GoBundance hops up on the stage and says as everyone go around not everyone, but, like, takes a bunch of people in the crowd and say, what'd you get out of that? What'd you get out of what'd you get out of that? And then, you know, after that sort of wraps up, he says, alright. Find someone that you haven't talked to yet and go and say what you got out of that talk and what your action steps are to put into action. What you Sweet. You know, what you got from it. So it forces you to be immediately intentional. And even if, you know, you don't do that, like, right away, it still plants that seed in the back of your head that, you know, you you start processing it on a subconscious level. You know? And it was interesting on on the flight home, you know, from Miami is a pretty decent haul. I was, like, planning to, like, I don't know, watch a movie or, you know, take some notes or whatever. And I find found out that I just sat there and just thought for, like, the entire, like, five hour plane ride. Yeah. You know? And just sort of, like, steamed and and just sort of planned out some changes.

Dan Austin: [15:00] Airplanes are good for that, honestly. They are. I mean, you

Mike DeHaan: [15:03] got nothing.

Dan Austin: [15:03] Can just, like, close your laptop or maybe not pay for Wi Fi or whatever, and you just you got a long East Coast to West Coast flight. You what else are you gonna do?

Mike DeHaan: [15:10] Yeah. You know, and I just spent a lot of time consuming and, just sort of processing everything. And, you know, that, like, it creates that subconscious change, which can really lead to a lot of proactive action once it sort of planted that seed in your brain.

Dan Austin: [15:25] But Yeah. Yeah. And one thing, like, I guess one more point maybe before we transition that I from this the same slideshow that I was looking at was, if you can imagine a vision of, like, a narrow spotlight coming down just above you, like that's your reality. But then when you put yourself in with another group of people that are like, like minded, they, they always say like minded, or maybe they're not like minded, you're trying to push yourself into that new reality, that spotlight widens across that group. And so it's beyond just you and your new reality is like, what is possible as opposed to what you're used to seeing every day in your life and how you move forward. And it's really easy to get zoned in that, especially for us, like we're a remote business. You know, we don't have a a a big office space where we're, you know, constantly interacting with different people in our office. Like, you know, you could easily see yourself kinda just like, this is my business. This is my little goal. And then you can't really get much farther. You don't see what's possible, but then you step into this new group of people that are gonna push you. And then all of a sudden, your spotlight widens, and now you have this huge what is possible. And it's almost too much because you're like, what do I what do I do next? Right? But it's just then you're surrounding yourself by these people that can help you see what is possible.

Dan Austin: [16:35] So I think that's really cool.

Mike DeHaan: [16:37] Yeah. And, yeah, the your network is your net worth. It's one of those things that sounds super cheesy until you kind of find people that that's a true

Dan Austin: [16:45] It sounds cheesy until you join a network and your net worth actually grows.

Mike DeHaan: [16:49] Yeah. Right. And then all of sudden, you're like, damn. The opportunities that come from knowing these people are are next level. And well, also too just one one one last thing on that. Your network is your net worth if you are also a contributor to that network.

Dan Austin: [17:02] Great point.

Mike DeHaan: [17:02] That's something I mean, even in even at GoBundance, there's obviously the people there that are there to consume and not contribute, and that exists across every community. Right? I mean, not necessarily that's a bad thing, but don't be upset if you don't get as much out of it if you're not also a contributor. Right. Know? And just like that can be in any sort of social group, whether you're, you know, by going to church, you're in your neighborhood, you're I don't know, at your workplace, if you're only the consumer in that network versus a contributor, it's gonna be very different. So it's important to be proactive. But I would say on the most part, for GoBundance guys, everyone kind of already knows that. So most of them are contributors. So, generally, it's extremely high value. Mhmm. Anyway, cool. So we're gonna do a hard left hand turn here. So one of the biggest questions that comes up a lot when we are talking to new investors and, you know, people in our instant investor program as well. In fact, I think we had some questions about this recently amongst them that you you worked with one of the the guys maybe on to go over some basic details is how exactly to estimate renovation costs on a property.

Mike DeHaan: [18:13] And what a lot of people seem to wanna do is they're like, I need to go and walk through it with a contractor. I need to, you know, get these quotes, all sort of stuff. But let's be honest, if you were dealing with an irrational off market seller, you know, not all off market sellers are rational, but ones that are a little bit loopy, you're not going to be able to go back there a bunch of times with, like, your flooring guy, your kitchen guy with all this stuff to start plotting out your renovations. So how can you do that without having that availability of time? And, we have a couple different ways that we're gonna talk about, and we also have a free tool that we have available for you. So after the break here, we'll dive right into that.

Speaker 4: [18:49] The instant investor program is our twelve week group coaching program, which includes a self driven course and access to our private investor community. We will take you through the full process of how we find our leads, how we market, how we do our sales and follow-up, and how we determine the best strategy for every opportunity that comes our way. On top of that, you will also join a community of other like minded investors nationwide that are all marching towards the same goals, and you'll have direct access to Dan and myself so you can continue learning and growing with us as we continue to adapt and grow our business. So whether you're a new investor or already established, our systems can help take you to the next level. So if you think you might be a good fit, go to the instantinvestorprogram.com and schedule a call, and we can have you talking to motivated leads in as little as two weeks.

Mike DeHaan: [19:31] Alright. Welcome back. Dan, when we go and look at building a budget and figuring out the cost to renovate a property, I know that's kinda your jam. I I help with the the acquisition side and, you know, figuring out ARVs and all that sort of stuff. But, mean, you're you're the renovation guy. I mean, this is kind of the joke we had the other day where you were saying, it's like, man, you'd love to do some syndications to get some passive money. And I was like, I basically already get that because you do all the work. Right. Right.

Dan Austin: [19:59] Yeah. Exactly. Yeah. Investing in syndications where it's easier.

Mike DeHaan: [20:03] Yeah. Yeah.

Dan Austin: [20:04] Yep. I gotcha. Yeah. So I think it all starts with where all the questions stem from or where you start to see people are kind of unsure how to do this. Generally speaking, you're going to have a walkthrough of a property at some level, whether it's you physically walking or someone in your team physically walking a property in your local market, or you're paying somebody to go take photos of the property so you can confirm. So you you've generally negotiated or been in a position where a seller is ready to sell as well as long as your offer is in that right range. So a lot of times in our local market, what we do, well, this is how we do it, is we will, generally speaking, get that appointment to walk through. And from that appointment, that's where we're going to build our renovation package. Because we already know what the ARV can be, because we've looked at comps in that area for that size of property. Now we just need to know what are the exact renovation costs, or a conservative approach of renovation costs for that property. That's why you're trying to walk through or get photos of the property so you can see what needs to be updated. And that's what, you know, calculator we use and all of our act managers use and all of our, people in our instant investor program have access to is essentially just, high level numbers for a kitchen replacement, for flooring replacement, for, bathroom upgrades, those sorts of things. And those are based on our personal data in our markets that generally are pretty good across a lot of different markets, but they're not exact for each market. And they're a little bit more of a conservative approach too. So we're not, when we're doing that walkthrough and we're going to build a rehab budget, we're not itemizing every little detail on a bathroom upgrade, but we generally know it's gonna be in this price range.

Dan Austin: [21:38] And you do wanna go a little bit conservative because you might uncover some things as you get into a renovation. And so it is nice in that initial offer, that initial negotiation to have a little bit of room as you're working with that seller. But generally speaking, like we don't even say if we're gonna wholesale a deal, we don't send out rehab budgets. We know what our rehab budget is when we're negotiating it. But everybody every buyer's gonna have a slightly different model of rehab and they're gonna have a different level of rehab than what, what you need to be selling. Right? Some people might be solopreneurs where they're buying the deal and flipping it themselves. They might have like a full time flipping business where their crews are really good. They might be trying to do an Airbnb type rehab on it where somebody else that's gonna buy it for you might just be straight up trying to bury it or flip it. So there's no point in getting super detailed at that point.

Mike DeHaan: [22:25] Yeah. Well, and I think that brings up a a super valid point as well of when we go to dispose of, try to wholesale things, that's also why we don't share a renovation budget because that's gonna vary so much. So we try to get our contracts under at a price where with our conservative numbers, it makes sense. And, I mean, best case scenario, you find that that mom and pop flippers can be doing it themselves. You can sell it to them for that much more because their renovation cost is 25% less than yours. Right. You know, so so when you when you're going through all that stuff though, I mean, you said, like, we know the general cost off of our packages. Mhmm. Like, when you say you're more conservative, how do you take into account, like, expected damages? Because there will be stuff that comes up. I mean, how often do we get into a bathroom and the subfloor is all rotted out because the caulking been ripped out around the bathtub and water had been leaking underneath there for the last, like, five years? Like, all the time. Right? Just stuff like that.

Dan Austin: [23:17] Never Yeah. So I guess let's step back and how do how are we gonna build this budget with that calculator? So what's gonna happen? Our acquisition manager

Mike DeHaan: [23:24] And the calculator you're talking about, you can get at collectingkeyspodcast.com/calculator, which is literally the one that we use and the one that we give to our, our group.

Dan Austin: [23:32] Yeah. It's that, that exact same calculator. And what it essentially what you're, what we're gonna do, acquisition manager is gonna go there, get photos or whoever's getting photos for us. And I'm just gonna click through the photos, and I can personally build a pretty tight budget from photos. But from for the acquisition standpoint, actually, our acquisition manager does this. I don't do this on all of our all of our deals unless we're actually taking them down, but go through. Okay. The comp says that the bathroom needs to be upgraded. The comp says we need new cabinets. Okay. Well, kitchen standard upgrade, say it's $7,500 say a bathroom, full gut bathroom, subfloors, little rotted, all that stuff, 5,000. Exterior paint, we got a fixed number in there. Right? And so whatever the comps are driving us to do are the things we're going to upgrade in that house. Mhmm. That's how we're gonna get that budget. And that's how we're gonna start our our range offer and our our negotiation with seller based on that budget. Say the budget for upgrades is, like, $35,000. And it's really based on the acquisition manager's walk through and also just looking at those photos. Because you miss stuff when you're walking through, but your photo grabbed it, so you're gonna look at certain things.

Dan Austin: [24:35] And that, like, that's that first high level budget where you start negotiating with the seller. And then we go into another layer deeper on budgeting when we choose to take it down, which is a little bit different process for us.

Mike DeHaan: [24:46] Yeah. And so I guess just to just reiterate that you're saying doing the comp to sorry. Doing the budget to get most like the comps that you're comparing to. So Yep. For example, if you're using comps that are, you know, have resold at a price that are still nineteen nineties kitchens, you're not going like, the budget's gonna be built around getting it to that level versus if something is a super high end comp. Like, you know, we see this a lot when there's especially around Spokane where there's some of these neighborhoods that have older homes right next to new developments. And it's like, yeah, the new development might be the same size, but that like, same size houses. But those are their twenty nineteen. You know, they have open floor plans. They have modernized kitchens. You know, it's gonna be a very different renovation of your nineteen seventies house that you're, you know, nineteen seventies split level that you're trying to upgrade. It's just not gonna be quite the same comparison. And you always have to be realistic of, do you actually need to get to the same level of those brand new build homes? Is that the expectation of the buyer for those comps that you're looking at? Yep.

Mike DeHaan: [25:45] And the question is typically not. And that's kinda what takes us down another rabbit hole here of determining what the true level of renovation you should do even is.

Dan Austin: [25:54] Definitely. It definitely needs to be data driven and market dependent. Right? As far as and and a softer market, when I say softer market, I mean it's more of a buyer's market. You're gonna have to do better rehab because you're competing. In a in a seller's market, just really, it's very, very data driven. You know? Like you mentioned, new construction, build in a seller's market's always gonna sell at a premium because it's new. Nobody's sat on the toilets before. People will pay a premium for that. And so when you're doing your comps That's the goal. You have

Mike DeHaan: [26:25] to have for no one to use the toilets before.

Dan Austin: [26:27] Exactly. Exactly. So, but, know, may maybe just now, if you're looking at, Hey, what about building a budget for when you take it down? How do I do that? Well, so a lot of times in our business process, if we can do it, which most often we can. So we've negotiated based off of our initial budget. Right? Say it's a $35.40000 initial rehab budget. We're able to get the seller into contract. And then we then we contact the seller again and say, hey, we just need our contractor to walk through. And that's when you or your contractor can go walk through and look more detailed and get a more detailed budget for you. And the reason why that matters is because a, you wanna have confidence that your initial budget is actually accurate and you don't uncover something that's just crazy, like, oh my gosh. The something you missed. Right? The house is falling over. I don't know. Major upgrades need to be done. Also, you wanna be able to put your materials package together so that right when that thing closes, you can have your materials package delivered on-site in your contractor starting that day. That's the most seamless process if you're gonna burr or flip is like right at closing, seller's gone, you're inside there. And what we do for that is a little bit more of a detailed inspection.

Dan Austin: [27:34] And when when I say detailed inspection, I mean, quantities and measurements for things. Right?

Mike DeHaan: [27:39] Mhmm.

Dan Austin: [27:40] And so, you know, if we're gonna do a kitchen rehab, we're gonna walk into the kitchen. We're gonna take measurements of the cabinets. So we know if we're gonna upgrade that kitchen, we can take those measurements along with photos to our cabinet company, and they're gonna order the cabinets and countertops for us, and those will be prepared and ready to go when we need them. Same thing with with flooring, doors, trim, anything that's going to get replaced, that's when you're quantifying those. Now you can actually have your exact mill materials budget. I always recommend, especially if you're, doing these yourself and you have a GC working for you that you maybe aren't as familiar with, like, you order all the materials yourself. Put those on-site. You don't need to be paying a premium for materials. You can get them delivered for most vendors. So you're gonna do that. You're gonna count all the lights. For us, we go top to bottom. Generally speaking, on an average flip, we're replacing all light fixtures, all plumbing fixtures, outlets and switches, which a lot of people don't do, but we do. So I'm counting all those quantities, making sure we're dialed in on all that sort of stuff. And we actually have our vendor all all their SKU numbers.

Dan Austin: [28:42] So we can just grab all those SKUs, dump them in, and then actually calculate through, a more detailed calculator of what our actual materials are gonna be, costing us and have those ready to order based on SKU number. We can call up the ProDesk or whatever, vendor we're using for those items. And so that's that more detailed, probably a second walk through where you have the the sellers are little bit more likely because they're like, okay. Thank god. I'm selling it. Now they're coming in and they're going to just take these measurements with their contractor. They're more likely to be open to that. Sometimes sellers are a little finicky, but, this is that one walkthrough where now that they're under contract, they're happy. They've got a close date. You're coming there to just take measurements. So you know what you need to do. And then now you have that more detailed budget. But again, it needs to be data driven. Don't go in there and do all this stuff that you don't need to do. So we like, for example, we have a flip right now. We started last week. It should be finishing up here this week. It's what you'd call a carpet and paint flip. The kitchen, it's okay. Cabinets are okay.

Dan Austin: [29:40] The comps are okay kitchens. So we're not gonna go in there like we'd I'd love to just knock the kitchen out and start over and make this thing HDTV beautiful. I can post on Instagram. People will say, wow. That's amazing. But that's a waste of money because the comps have a ceiling. The comps definitely have a ceiling, and they're telling us to do carpet. They're telling us to do paint. They're telling us to replace anything that's majorly damaged.

Mike DeHaan: [30:02] Mhmm.

Dan Austin: [30:02] So that's what we're doing. So our budget on that one was really easy. Okay. We know what we know how many square feet of the house we have for paint. We know how many square feet of carpet. We know how many fixtures go in there. We counted all the fixtures, light fixtures, plumbing fixtures, things that we know we're going to replace. That's our budget. We're not talking about knocking out bathrooms, replacing bathtubs because that's when your labor starts going up and up and up and up because you have so much more time in it.

Mike DeHaan: [30:24] Yeah. And and that's that's the biggest mistake that so many new renovators make is they you know, their main influence they've seen has been on the Instagram, the before and after and all that sort of stuff. When really if you're doing this, it's a business. Right? You know, I understand that there's a fun aspect to try and make it look good. But honestly, what's more fun than having a really awesome looking kitchen that you just remodeled is having a $50,000 check that you just made. Yes. Flipping a house doing very little work. You know? Yep.

Dan Austin: [30:50] Yeah. Because, I mean, it can be a major swing in your, in your profits, honestly. Little things add up. That nice, backsplash, those new countertops that you didn't have to do, the whole new bathroom tile shower and all that sort of stuff. Like, don't necessarily need to do a lot of that, especially if you're in that median home price in your market where that's not even what they're calling for. If you wanna get into luxury flips, which you see people all over Instagram, that's what they do. That's their niche. That's a luxury flip. And they're usually pretty seasoned at that. If they're you know, have a wide following and they're doing a lot of stuff in, say, a major metro like a Seattle or San Francisco, that's what they that they know what they're doing. They're taking a $500,000 purchase and selling it for a million dollars. And so, of course, it needs a $200,000 budget. Your typical median home price, you're not gonna need that.

Mike DeHaan: [31:38] Yeah. And especially in this, you know, in a seller's market, which it still is right now, even the thing that started to shift a little bit, you don't not everything has to be dialed in. Because, like, if you have that more, like, the picture perfect kitchen, bathroom, you know, whatever, The household for sure sell faster, it's gonna be more desirable. But when people are buying everything anyway, it doesn't matter nearly as much. And if you can get away doing as little as possible, I mean, that that's that's really how you make a lot of your money. And I also think that that's one of the reasons so many people right now that have been flipping over the last, you know, number of years are claiming they can't find any opportunities now. Not only are they not searching for their opportunities because they were never in the instant investor program, didn't learn how. They've never that's half third in there. Plug.

Dan Austin: [32:22] Plug. Shadows.

Mike DeHaan: [32:24] Yeah. But but also, you know, they're looking at things thinking they need this huge renovation because it's not what they've done in the past that has, like, a full kitchen, a full bathroom. Like like, they I don't even understand that they don't have to do that. I mean, we've bought houses and made large amounts of money off of deals that everyone said there's no spread here because the renovation's too big. And we'll go in and we'll be like, I don't know. We did some paint, trim, and flooring, and we flipped it and we made, you know, $50. But apparently, no one wanted to buy it for a $15,000 wholesale fee because they were thinking that they had to redo the entire house, which realistically is not the case.

Dan Austin: [32:58] It's not.

Mike DeHaan: [32:59] So yeah. So, ultimately, I guess, to wrap it up, kind of the two ways to approach it, I guess, the two steps to it. So the basic wholesale rehab comp, the easiest way to do it honestly is to go to collectivegeezpodcast.com/calculator and download our calculator tool. It has, like, literally drop down menus that let you select whether things are needed or not that you can do based off photos. I mean, we do a lot of those estimates completely virtually because our, our guy goes out and takes photos for us or, you know, we have the seller send us photos. After you do that, if you are going to be buying a property yourself, at that point, you approach the seller and maybe go out with a contractor, take measurements, and get specific costs and estimates on materials. If you're still trying to figure out your materials, look at what similar stuff nearby is, like, your similar comps, like, what they look like. And, honestly, I think a good way to do it would be if you took those photos off of Zillow or whatever and just, like, went to a manufacturer and said, hey. I want this. Like, how can you help me? You know, what what what would this cost with

Dan Austin: [34:04] making Yeah. One quick hack I tell people trying to learn this is just to add to that is, yeah, go you got a standard bathroom. Right? Five by eight, whatever the size is. It's got a shower, a tub, a vanity, a vanity mirror. Just go through go go to the bathroom you live in and look at all that and then go and buy the fixture or go to like Home Depot, look at the fixtures that you would need to replace those to upgrade them with. That's your material budget for a bathroom. It's not even it's a toilet. It's a vanity. It's a faucet. It's a shower. You can like quickly understand what material costs are. I mean, quickly. Then you just have to understand what the labor element is based on what your contractor is going to charge you. If it's going be a per unit or a time and materials type thing. If it's a time and materials, which could be recommended in certain scenarios, then you just ask them what their hourly wage is. $50 an hour. Perfect. I'll allocate sixteen hours to this.

Mike DeHaan: [34:50] Yep. Yeah. And, you know, probably thinking that sounds like a lot of work, and I hate to break it to you, but it kind of is. But, really, once you have the process figured out, like Dan was saying before, he knows the SKUs and everything, it goes pretty quick. So one that's the more detailed one if you're gonna buy it, renovate yourself. And then the third key point being that look at what you well, of a renovation you realistically need to do to make the amount of money that you need to make and to not be over renovating where you're basically just flushing money down the toilet to make a house look good, really, social media or for your own well-being. Yeah.

Dan Austin: [35:22] And trust me, after you do a dozen or more of these flips, you don't wanna go pick out materials. You just wanna go get the exact same thing you did last time.

Mike DeHaan: [35:30] It's Yeah.

Dan Austin: [35:31] Pick it out. Here's your color scheme for this house. Boom. Done.

Mike DeHaan: [35:34] Yeah. And, well, that that's also why you have so many people that are like, I hate the house flipper look of, the white cabinets and the white countertop. And it's like, you know why? Because they're institutional investors, and they're sick of freaking kitchens. And they're just like, here you go, contractor. This is the stuff that I want. I'll buy it. Yep. It just keeps it simple. But yeah. So the the three three steps there, the easy comp with calculator, the detail comp with the contractor, and then, going and making sure that you're renovating as needed and not as you desire, to get the most money out of it. And ultimately, it's not rocket science, but there is a little bit of practice that goes into it and, you know, some of those tools will help you get it done. So anyway alright, Dan. Well, good explanation. Yep. If you guys wanna hit us up on socials, you can hit me up at mike underscore invest on Instagram. You can find Dan at investor man. Dan, go ahead and shoot us DMs. We love chatting with people on there. Then if you go to quickandkeyspodcast.com, you can get our five step guide subject generating off market leads. And then if you go to collectingkeyspodcast.com/calculator, you can get the calculator that we talked about in this episode. And then outside of that, if you wanna learn to run this business yourself and start making fat checks off of some wholesales, buying discounted properties, having great investment opportunities for yourself and your family, you can go to instantinvestorprogram.com and book a call with one of us, and we will see if you'll be a good fit for our group coaching program. We have, you know, little squad over there right now with thirteen, fourteen people. And, some people are starting to get some good traction. Our our guys down in Aaron and Heather down in South Carolina.

Mike DeHaan: [37:12] They're really starting to get some good leads, and it's funny Yeah. Watching them go through the whole process of, like, we had a seller call in and say this. Is this normal? And we're like, oh, yeah. You're you're getting

Dan Austin: [37:22] into the trend.

Mike DeHaan: [37:23] Now I love it.

Dan Austin: [37:24] Yep.

Mike DeHaan: [37:25] But, yeah, go check out instantinvestorprogram.com and see if you'd be a good fit for that. Besides that, anything else, Dan? You'll send us off?

Dan Austin: [37:31] Yeah. I'll send us off. If you have an over rehab issue, come to me. Hit me up investor man Dan on Instagram. I will be starting a rehab rehabbers anonymous program. It's a 12 step program where I can get you out of over rehabbing your properties and getting straight to profits.

Mike DeHaan: [37:46] Over rehabbers. There you go. No. But for real, if you have rehab questions, hit up Dan. He'd be, probably happy to give you way too much time for for free. Absolutely. Dan's that kind of guy. So Absolutely. Invest in Dan. Go find him on Instagram. Alright. Thanks, everybody. See you next week.

Dan Austin: [38:02] Alright. See you guys.

Speaker 2: [38:03] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.