3 Tips for New Investors Rehabbing for BRRRR During COVID-19
There are multiple ways to tackle the rehab piece in value-add investing. A lot of investors opt to take the DIY approach to save on construction costs. However, I’ve always believed that the true way to scale your portfolio is to focus on the big needle-movers for your business, which are deal analysis and finance. These are things you simply cannot outsource.
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And if you are a parent like me and have limited time, it becomes all the more important to outsource.
As I mentioned in my “buy” post, 3 Tips for New Investors When Buying for BRRRR During COVID-19, we have renovated two duplexes and a single-family home in the last three months. We have finished all of those projects within budget, but we were delayed by two weeks due to the moratorium on construction. Having been through this, I can offer a few tips to a new investor trying to tackle a BRRRR rehab project.
3 Real Estate Rehabbing Tips During COVID-19
Virtual video walkthroughs
Instead of showing up at the job site often, we have opted to do the majority of our walkthroughs virtually. Twice a week, our contractor gives us a virtual tour of the construction. Also, anytime there's a key decision to be made, he takes a video and sends it to us.
We implemented this method early on in our business. Now, we are sticking to this plan, which allows for the safety of the people involved, including ourselves (and in our case in the current circumstances, it also helps with the lack of childcare).
One of the great benefits is saving time. We live an hour away from some of our properties, so we save eight to 10 hours of travel time every week by going virtual. This is one of the many changes we will be continuing to implement even after the pandemic is behind us.
The good ol’ 10-15% contingency
The starting point to any well-managed construction project is a robust project plan with contingencies. Setting checkpoints and monitoring them throughout allows an investor keep the project on track even if there are surprises.
I advise all of my students to safeguard themselves by adding 10-15% to their rehab budget as a contingency in case of any surprises during the rehab phase. This is another practice from our pre-COVID projects that is serving us well now.
Estimate slightly longer rehab time
For everyone’s safety, social distancing while renovations are going on is important. This means that two people who used to be able to work in the same area before need to now take turns to do so. This is why we are estimating slightly longer than usual rehab times, allowing us to avoid surprises in our scheduling milestones and for our contractor to set expectations early on in the project.
Do you have any questions about how to implement these?
Let’s discuss in the comment section below.