In Part 3 of our series, we explored how to define your property criteria and identify the right opportunities. Now that you’ve found a property that meets those criteria and have it under contract, the real work begins. Part 4 is all about what you do during the investigation period—typically a 7 to 10 day window (though timelines can vary)—to assess the property and get a clear-eyed view of its current condition and the cost to bring it up to your investment standards.
For us, ordering a detailed inspection report from a qualified inspector is non-negotiable. While general contractors (GCs) can offer excellent insight into renovation needs and construction costs, they are not trained to uncover all the health, safety, and code compliance issues that an inspector is trained to catch. Especially as long-distance investors, we rely on inspectors to act as our third-party eyes on the ground, giving us a comprehensive, unbiased snapshot of the property’s visible condition.
Once the inspection report is in hand, it’s time to get bids from contractors. Here, we’ve developed some key principles that help us stay efficient and informed. First, we lean heavily on local professionals—our real estate agent, leasing agent, or property manager—for feedback about the neighborhood and what improvements actually make sense for that submarket. They understand what tenants in that area expect, and what upgrades might be overkill. Their advice helps us find the sweet spot: delivering a property that’s a little better than the competition without spending unnecessarily on high-end finishes that won’t command higher rent or attract better tenants.
When we request bids from contractors, we tailor the scope of work to reflect both the improvements needed from the inspection report and the upgrades that match our target demographic. We make sure to distinguish between must-fix safety issues and more cosmetic or long-term items. Our inspector and realtor often help us make those distinctions.
We’ve learned to be very specific with our scope of work: outlining what type of materials we want (right down to brand and finish when needed), what each task entails, and where we want to draw the line on quality versus cost. It’s important to ask for bids that are broken down by task—not so detailed that it becomes a burden, but enough to give us transparency. If a contractor is charging significantly more than expected for a certain line item, that breakdown allows us to identify it and ask follow-up questions.
Understanding local labor and material costs is essential in reviewing these bids. That way, you can better evaluate whether a quote is reasonable or inflated. And don’t be afraid to go back and forth with the contractor as you refine the scope. Ask questions. This is your opportunity to learn, and every bit of clarity you gain will make you a better investor. Whenever possible, we aim to get at least three bids from GCs. Recently completed investor referrals are usually our best source—contractors who have delivered good work at a competitive price. But keep in mind, even great contractors can get overbooked, which sometimes affects the quality of their work. So it’s a good idea to confirm their availability to start close to your expected closing date.
Sometimes, it makes sense to divide the rehab between multiple tradespeople. For example, we’ve used our go-to flooring, HVAC, or painting vendors when we know and trust their work. Coordinating a multi-vendor project takes more effort, but it’s often worth it to ensure quality and reliability.
During the diligence period, you may also want to bring in other professionals depending on the property. In areas where foundation issues are common, a foundation engineer can confirm whether there’s movement beyond normal tolerance. Sewer line inspections are another worthwhile investment—especially on older properties. The cost of repairing or replacing a sewer line, particularly if it runs under the building’s foundation, can be massive. We’ve found it better to spend a few hundred dollars now than risk a five-figure surprise down the road.
Keep in mind, all of this work—inspections, contractor bids, additional evaluations—must happen quickly, within your contract’s diligence period. Time is of the essence. For multi-family properties, the timeline is often longer, but for single-family and small multifamily deals (1-4 units), things move fast.
These evaluations can also become powerful tools for negotiation. If the inspector or GC uncovers major issues, you may be able to negotiate concessions or a price reduction from the seller. And sometimes, the findings are serious enough that the best decision is to walk away from the deal entirely. We’ve done this on more than one occasion. While disappointing in the moment, walking away can save you from taking on a project that’s too big, too risky, or overpriced for what it truly is.
Some investors are comfortable eyeballing a property themselves and moving forward without professional reports. That’s not our style. Most of our investing has been done remotely, and having experienced third-party professionals on the ground has been critical to our success. Even when we ultimately don’t move forward with the deal, the insights we gain are well worth the cost.
One final reminder: Be respectful of your professionals’ time. The more organized you are, the better the process will go. Clear scopes of work, well-prepared questions, and timely communication will help you build long-term relationships with quality vendors.
And yes, even with the best preparation, something will go off plan. Budgets get blown. Timelines slip. A surprise issue pops up when the rehab starts. Real estate investing isn’t about eliminating surprises—it’s about being ready for them. If you stay focused on the big picture, and treat your team with fairness and respect, you’ll build a strong foundation for success.
In Part 5 of this series, we’ll shift gears and explore financing fundamentals for 1-4 unit properties. Stay tuned!