Somebody wants $1,200 out of the $9,400 I have to look at my first deal

Question

I've got $9,400 saved. That's it, no other cushion beyond about two months of expenses I'm not touching. I've been pricing out what a first small rental actually costs and the gap between what I thought and what the spreadsheet says is uncomfortable.

A consultant I found through a local investor meetup will do a deal review for $1,200. Two hours on the phone, he rebuilds my numbers, writes up what he thinks I got wrong, and gives me questions to ask before I go hard. He does mostly small residential in my area and the two people who referred him both said it changed their offer price.

The case for spending it is that I don't know what I don't know, and if he catches one bad rent assumption or one deferred maintenance item I missed, $1,200 is nothing against a $9,400 total. My inspection is $500 and nobody thinks that's optional.

The case against is that $1,200 is 13% of everything I have, it comes straight out of reserves, and going in thin is how first deals go sideways. There's also the version where I spend the money, he tells me the deal is fine, and I've learned nothing I couldn't have learned by reading harder for another month.

I genuinely don't know which of those is the sensible read, so I'd like to hear people vote it.

karen_whitfield · Accepted Answer

The problem with the question is the timing, not the price. Right now you don't have a deal, so a $1,200 review has nothing to review and turns into general education, which is worth much less than $1,200 and is available cheaper.

What I'd do is wait for a specific property under contract with a real inspection period, then spend the money on that. At that point his two hours are pointed at actual numbers you have to commit to in twelve days, and if he finds a $9,000 roof or a rent assumption that's $200 a month high, you use your inspection period and walk. That's the version where the fee pays for itself.

On the reserve worry, I'd take that seriously and reprice the scope. Ask him for one hour at whatever his hourly is, focused only on the rent comp and the capital items. Most people doing this work will sell you an hour. If he won't break the $1,200 into anything smaller, that tells you something about how he sells.

And say out loud to him what you told us, that this is 13% of your capital. A decent one will tell you whether his review is the best use of it. I've had a consultant talk me out of hiring him because he thought my question was answerable in one email, and that's the one I called back twice.

raj_mehta14 · Answer

Months of reading about notes and I'm still mostly confused, so I'll say the thing that reading hasn't fixed for me. Another month of reading harder is not going to do what you hope. @orchard's version at least attaches the money to a real address with a clock on it.

priya_n21 · Answer

I'd rather pay someone $1,200 to talk me out of a bad first deal than spend a year fixing one. But your reserve is the thing that keeps a vacancy from becoming a sale, so the one hour option @orchard described is what I voted for.

Somebody wants $1,200 out of the $9,400 I have to look at my first deal

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