3 Things to do Before You Start that Rehab Project

by | BiggerPockets.com

Congratulations! You just closed on your first fix and flip deal. Now what?

The natural tendency most first-time fix and flippers have is to pick up the phone and start calling general contractors, tradesmen and suppliers for bids on everything from flooring to bathroom exhaust fans.

Easy does it partner!

While I agree that time is of the essence when flipping houses there are some important housekeeping items you’ll need to address before assembling a team of competent trades, including:

  1. Getting insurance.
  2. Securing the property.
  3. Turning on utilities.

Getting Insurance

If you obtain a hard money loan to purchase a distressed property the lender will require you obtain an insurance policy and name them as additionally insured prior to closing. That way if the house burns down the lender will receive the money you borrowed directly from the insurance carrier.

For a cash purchase, insurance is not required. When the deed gets recorded, either by you or the title company, you will not get instructions from the escrow agent or a reminder letter from the city to obtain a homeowner’s insurance policy. You’re on your own.

YOU MUST PROTECT YOUR INVESTMENT. BUY INSURANCE. DO NOT FORGET. If your house goes up in flames so does the cash you spent to buy it.

A fix and flip property cannot be insured with a standard homeowner’s insurance policy, at least not in my neck of the woods. First of all, the house is vacant. It makes insurance companies nervous when no one lives in a house they insure. Weird stuff happens. Appliances, cabinets, air conditioners and copper plumbing disappear. Sometimes fires start. Roofs leak. Windows break. You get the idea.

There are a few insurance companies that sell vacant home policies. These policies are usually short-term and expensive. However, in most cases they’re a fix and flip investor’s only option. Put in a call to your friendly neighborhood insurance agent. They probably can’t underwrite a policy for you but may know someone who can.

Securing the Property

While kicking down a door can be fun and physically challenging (and looks really cool on those reality TV shows), it’s not my preferred method for gaining entry into a secured home. The force of the kick usually disintegrates the door and doorframe, adding to the cost of the rehab. The better bet is to hire an experienced locksmith to rekey the house. I trained my project manager to change the door locks, saving me about $100 per house on locksmith costs.

Once all the locks have been changed and the windows are secured I suggest you put a spare key in a coded contractor’s lockbox and hang it on a hose bib outside the home (never on a door handle because that lets all the thieves know that the house is vacant.) By placing an extra key in the contractor’s lockbox you’re no longer saddled with the burden of letting every single trade in the house every single time they need access.

Turning on Utilities

It’s pretty hard for a plumber to plumb, or an electrician to … well, electrify, or the gasman to pass gas (I couldn’t resist) without water, electricity and gas turned on. The initial walkthrough with your general contractor and specialized trades won’t go well either if you can’t turn on any lights.

Be sure to arrange for these utilities to be turned on at least 2-3 days before you schedule the first walkthrough. Some utility companies take up to 5 business days for new service calls. It would be a shame to have your rehab delayed by a week because the house has no power or water.

Okay, now you’re ready to get started. Happy hammering.

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.


  1. Jason Grote

    Great advice Marty! I get so excited, I many times forget to have the utilities turned on! Breathe deep and set the stage with these 3 very important details. If I can add one more, it would be to have a fairly specific plan for the remodel according to your exit strategy. When I haven’t done that, I will bring in subs for bids and spend half of the time deciding what I want them to do. Then I go to get another bid from the same trade and I have them quote something different! Not good! Write down your remodel plan or even better have it drawn up.

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