How Are You Approaching Rehab Projects in Today’s Market?

Question

Hey BP community,

With material costs stabilizing a bit and financing options evolving, I’m curious how others are currently navigating rehab projects—especially when it comes to funding, timelines, and contractor management.

Here are a few things I’d love to hear your take on:

• Are you using private money, hard money, or other financing strategies for your rehabs?
• Have you adjusted your budgeting or scope of work due to recent shifts in labor or material pricing?
• How are you managing contractor relationships and timelines in today’s market?
• What lessons or best practices have helped your recent rehab projects stay on track?

Are you using private money, hard money, or other financing strategies for your rehabs?

Have you adjusted your budgeting or scope of work due to recent shifts in labor or material pricing?

How are you managing contractor relationships and timelines in today’s market?

What lessons or best practices have helped your recent rehab projects stay on track?

I’ve been working alongside investors who are actively rehabbing properties and facing both new challenges and opportunities. I’d love to hear how others here are adapting and thriving.

📩 Drop your experience or insights below.

Looking forward to learning from everyone’s experiences!

Mike Klarman · Answer

I've coordinated over 40 rehab projects as a consultant, I've also closed on hundreds of HML as a broker.

This is what I have learned:

Project cost is everything.  You need to be around 60% project cost to ARV.  And you can't use the top line comps in analysis.  If your 75% project cost is built on the top line comps, then if you sell in the middle of the pack you may just break even.

You have to find a way to keep project cost at 60% while using ARV Comps minus 10%.  If the arv comes in at 250k, you better use 225k or 220k in your formulas and that means you can be no more than 150k - 155k on project cost all in purchase and rehab.

You have to find the right project that works, don't force anything to work.

To have a project cost that low, you need two things.  First you need a network set-up in the secondary markets: Auctions, Foreclosures, direct from seller.  You don't find these projects on market, ever.  But when you find a gem in the secondary, you are buying at a steep discount.  Maybe 30% - 40% off the market price.  Now, you start the formula ahead of the game.

The rehab is by far the trickiest part of the BRRRR.  I've been burned by at least 10 contractors in three diff markets, so that tells me it is not market specific.  A Good GC business is hard to run right, it is capital intensive, labor intensive, and it takes coordination, responsibility, honesty, and effort.  Most GC's get lazy as soon as they take their pay out of the first money in.

You are better off developing your own sub list.  Your Demo, mechanicals, roofer, floors, painting, and interior finish team.  Run the subs yourself.  You hold the money and pay when you see work done and hold the money if it is not done correctly.  Your rehabs will be 10% - 15% cheaper, and come to be of better quality.

So now you are buying cheap, performing cheaper rehabs, managed better.  Now at the exit, even though your comps say 250k, you can list this thing for 220k and make more money than the investor that used hard money for an on market property and now he has to sell at 250k just to make anything.

The best way to go on the purchase and rehab is a private money loan.  Hard Money can work, but it certainly does not work in every situation, not because of Hard Money, but because the asset does not work.  Probably in it for too much and it needs too much work and the project cost is inflated.  Hard to get any loan to work in that scenario.

Sultan Ali · Answer

Great insights! I’ve been supporting investors here in NJ with off-market leads, and I’m seeing similar trends tighter scopes, faster timelines, and more use of private capital. Sounds like you’re in the thick of it too happy to connect if our paths align!

Lauren Robins · Answer

Hi Ellisa!

I’ve been having similar conversations with investors lately as we all try to navigate the changing rehab landscape. With material costs finally stabilizing a bit and financing options shifting, everyone’s had to adjust their strategies to keep projects on track and profitable.When it comes to funding, I’ve seen a noticeable shift back toward private money. Hard money lenders are still in play, but with higher rates and stricter terms, many investors are leaning on relationships with private lenders who offer more flexibility and better repayment structures. Some are also using HELOCs or cash-out refinances from previous deals to self-fund rehabs, which gives them more control over timelines and cash flow.Budgets and scopes of work have definitely been affected too. With the cost of materials like lumber and drywall leveling out, some investors are taking the opportunity to expand their rehab plans. On the flip side, others are scaling back finishes to match neighborhood comps and protect their margins. Contractor management is where a lot of people are tightening things up. Some investors are building their own small crews or hiring in-house labor for better reliability. For those still working with GCs or subs, having a clear scope of work, tying payments to milestones, and checking in weekly has become the norm. As far as lessons learned, padding your timeline by at least 15–20% has been a lifesaver. Delays still happen and having that buffer helps avoid getting caught off guard. I’ve also noticed that working with contractors who live nearby (within 10–15 miles) tends to improve reliability. And it really helps to have backups for key trades like plumbing and electrical.Bottom line: the investors doing well right now are the ones who’ve streamlined their systems, built strong local teams, and focused on efficiency over flash. There’s still plenty of opportunity out there — it just takes a more thoughtful, dialed-in approach than it did a few years ago.Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.