How do you remodel for such low costs?

27 Replies

As I started to learn a little bit more about flipping and rehabbing and making places rent ready -- it is amazing to me how people are succeeding with low cost remodeling.  Simply, how do you do it?

We have just been working on our own home, and while I understand some of the materials are a little nicer, I still don't know how people can really change a whole house for a low remodel cost.

@Dawn Anastasi   shared recently that she did a whole house and new windows for a low cost!  Dawn, how did you do it? 

I assume you are working directly with contractors and acting as your own general.  Even pulling permits is expensive.  

I would love to know your basic strategies for budget remodeling that is good quality for your properties.  Thanks so much!

Karen

There are a ton of tricks to doing this....part is knowing your market well....what things costs and what labor costs is a good start.  If you're willing to use illegal labor as some are...in certain areas, you can get a room painted for $50 versus the $150 to $300 you'll pay in my market for a professional job.  Drive through some areas going through renovations in your market, look for contractors and get out and introduce yourself.  Winter is coming and many of us will be H-U-N-G-R-Y!  Not me though.  Chat the contractors up a bit without holding them up...let them know you are buying a property to rehab and will need to get some pricing.

Find a couple of good REO or investor-friendly agents in your market. Take them to lunch to discuss your plans and pick their brains a bit for resources. Most agents will take time for a decent free lunch. Have your proof of funds ready to show them so they know you are serious.

Pick through Craigslist materials listings to see if you can find some decent resources.  I hit garage sales for somethings like furniture & fixtures for my rentals and always ask "what else you got."  In atlanta, I've developed some decent wholesaler relationships this way to get some of my materials at a discount.  Home Depot for instance dumps trailerloads of returns and discontinued goods at a discount to wholesalers who then remarket, often on CL.  At least this is true in our market.  

In the end, everything is about the relationship.  If you develop good contractor relationships....pay them right, don't go cheap and ALWAYS get the bid in writing....and don't do business with friends.  I know a very seasoned investor who just did a $80k rehab with a contractor she has known for many years....without a written bid....job went to $120k and most of the work is CRAP.  So much for that "retail" flip which is now a fixer with a great kitchen!  Happy Investing...

You know I am paying a full price contractor and the electrician installed the lights in my bathroom are 1/2" uneven and one is off level.   I will have a chat about the quality of work that they would want in their own home…  

I want to run a business properly, so I believe in insured workers and proper permits, and people who have the knowledge to do a job correctly.  Thanks for those tips.  Curious to learn more!!  :) 

My goal is to be a landlord, but many of the properties I would consider would need kitchen or bath work.  Heck, my house needs some more work and I'd love to learn how to save money and get a job well done. 

I do some of the work myself, which saves money.  If I had to hire everything out, then yes it would be more expensive.  So when I quote my costs for rehab, that's not really including the cost of my time, which may seem "cheaty".

Another thing I do is try to get the materials myself; this way I can shop for things on sale or clearance.

Regarding windows, my contractor doesn't get custom ordered windows, he gets them off the shelf or returns, and that brings the window cost down considerably. Then they are fit to the opening and trimmed on the outside.

I don't go with the most high-end stuff, but I want things to look nice for the tenant.

Well, I own my custom home building/full service remodeling company.  So for my flips/rentals, I'm at "somewhat" a advantage over other who hires contractor.  :)

But this is my experience:

For the longest time, I used to bid pretty low as a whole sale price for investors to remodel their flips.  For the cheaper flips, it works out great.  These are low end houses, or rentals/apartments etc..., where we would not care as much on quality but rather speed.  Things like painting: we would spray the whole house with one color, one coat kinda thing - quick and dirty.  Moldings (baseboard, door trims etc...) would just get one quick coat as well.  Kitchen would be RTA (ready-to-assemble cabinets) with prefabricated granite counter top.  2 guys would be able to finish a 10x10 kitchen in 1 1/2 day.  Shower wall is the full sheet (vs tiles, marble/natural stone which requires custom fabrication).  Windows would be retrofit styles, 30 minutes a window to replace type of deal. etc...  So we can come in and get out fairly quickly and still make a little profit.

But as the properties get higher in prices, hence the quality requirement, we have to charge "custom" prices for it.  Now clients would want level 5 wall finish (smooth surface vs textured) which takes 3-4 times longer; paint would have to be super sharp on color transitions (1 coat primer, at least 2 top coats); all baseboard and trim work & paint have to be perfect: no brush mark, no visible nail holes etc;  and all everything else in between.

So my point is: beside using your elbow grease to gain sweet equity, pricing is subjective to quality.  :)  You can get cheaper a little bit, but don't get the cheapest hacker you can find.  Contractors like our company would come back and do touch up, fix minor leaks/defects etc... no matter no cheap/expensive the project is.  Not the cheap hack.  They'll be gone before you know.  So contractor reputation, recommendations (like above posts suggested) and be fair to contractors in term of prices, are more important for long term.  Interviewing at least 3-4 contractors to narrow down 1-2, then try them for a couple of projects for size.  Then build a relationship for future projects. 

Just my 2 cents.

Nhi Nguyen, Contractor in CA (#850151)

As far as materials are concerned, I do the following two things to lower material cost:

#1. Buy Lowe's 10% Off Coupons on eBay. There's usually someone selling 2-3 per auction for $2.50 each. Home Depot will accept these coupons.

#2. Use Giftcardgranny.com to compare reseller gift card prices. Cardcash.com had a -16.5%* off the face value of gift cards for Home Depot.

Combined, you've saved yourself ~26.5% on material costs, at least from Home Depot.

*12.5% off face value + 3.5% from paying via ACH + 1% bulk order (>$1000 in value).

Different areas will have higher costs, both due to local building requirements and cost of labor.  My experience in Milwaukee (not far from you according to your profile) is that both of those things are expensive in that area.  Lots of union contractors, which increases labor prices dramatically, as well as the fact that there are very few investors, so contractors aren't accustomed to "investor pricing."  And building requirements are pretty strict given the weather -- it's more expensive to do things like roofing, siding, underground utilities, etc.

So, you'll likely see higher rehab costs than many places in the country.  But, if you act as your own GC and if you find contractors who are accustomed to working with investors, you'll probably be able to trim costs a good bit over the typical retail costs.

Karen you are having a lot of work done by contractors that you are quite capable of doing yourself, that is if you want to keep costs down. I have 25 years of construction experience and know that about 50% of the work performed by contractors and sub contractors can be handled by determined homeowners, but you have to know your limitations.

Get rid of your fear of electricity and learn that being shocked is not that big of a deal. Here I am ONLY talking about replacing switches, outlets and installing fans and lights. I am NOT talking about wiring a circuit breaker panel, or doing a drop from the power line. I have been shocked well over 1,000 times and am still alive. 

A woman can hang drywall as well as a man, although you may need some help hanging ceilings and staircases. Leave the tapping and texturing to the experts, but you can do the painting easily yourself.

Go fishing around Home Depot, they have cost breakdowns for everything, an example is $80.00 (Southern California prices as of last month) to remove and replace a toilet. You will need a wrench, a wax ring and a little muscle to save yourself $80.00. These costs add up over a job.

To find a good contractor, drive around your community and find contractors working on other peoples property. You want to find contractors doing remodeling work, find out who owns the home and talk to the home owners. Find at least 3 different contractors this way, find out who their subcontractors are. Test your limitations and know what you really can't do and leave that work to the experts.

With all of this said, at some point you will have to balance your time with your money. Are you better off paying someone a few thousand dollars and getting the job done faster or are you better off taking more time to finish the job.

This is something I have to focus on as well.  Learning how to do many task will save thousands of dollars.  Me and my wife will take on this task of learning as much as we can about house remodeling.

Originally posted by @J Scott:
Originally posted by @Nicholas Jasmine:

Learning how to do many task will save thousands of dollars. 

 It will also cost you hundreds/thousands of hours.  What is more valuable to you, money or time?

 I used to do a whole lot more myself.  I painted the interior of a 1400 square foot house (ceilings, walls, trim) almost all by myself.  Exhausting!  I did save money, but it did cost me time.  So @J Scott 's question is something to think about.

For those just getting started, however, there's nothing wrong with trading sweat equity and learning something in the process.

I actually really LIKE painting (I know, I'm strange) but I don't want to be a house painter for a living.  I'd rather be a real estate investor.

I think doing some things gives you an appreciation for the people that do them for a living. So certain things are worth doing at least once. Get a little sweat equity and the next time you know what you are paying for. 

Also, on a personal level  I never make a house change without shopping for the components. Getting a better price may mean not choosing the high end tile or the special door and shopping for cabinet deals. I am not saying talk yourself out of everything you want but ask will anyone know the difference and if so will it matter.  I also like habitat and have had good luck there.

 For contractors always get multiple bids and check their work out somehow.  That being said I still don't know how some people get the prices they do,  I figure it is either area or volume. 

My wife is a genius at this and it makes a substantial difference. Craigslist can be a great source of even high-end materials. And, in Minneapolis at least, there are plenty of stores like Bauer Brothers that offer used materials, many of which look great in the old houses in the area. To be honest, I don't know how she always does it, but before shelling out large sums for new materials, she tries to think creatively and typically comes up with something. Sometimes she mixes more expensive material with less expensive material in a way that, in the end, looks great.

Labor is more complicated because you often get what you pay for. We never use the highest cost labor, but we have learned that using the lowest cost labor is equally bad (for different reasons, of course). We save some money by doing some of the work ourselves. My wife, for example, taught herself how to tile bathroom floors during our last flip. I am must less useful when it comes to those types of tasks. 

@Nhi Nguyen  Hit the nail right on head. 

Reality is that most average contractors have no desire to work with investors because investors want things done to a million dollar finish level, and pay prices for work in the hood.

I am also a GC and can tell you that having reliable workers costs money, and operating a business costs money. If you look around the forums you will hear alot of horror stories about contractors and most often I think its because we as investors are attracted to the lowest price. While they may not pay monetarily they pay with hours of wasted time chasing there contractor to get him to finish, complete less projects per year then if work were handled professionally, and years off their lives from stress associated with dealing with someone who is completely unprofessional. 

Also keep in mind that 95% of repair estimates from wholesalers are falsified (maybe intentionally to make a deal seem better, or maybe due to inexperience)

We do work for a few high volume flippers, and they know that we are not the cheapest (we are still reasonable), but they decided that time has value as @J Scott mentioned. 

Self completing work does not count as free- you have to at least bill yourself at $10 per hour because you could earn that at McDonalds or Delivering Pizza. Also we can do a full rehab in a month including rewire, replumb, insulate, sheetrock, flooring, and all finish work. How long would that take you to do on your own? How many deals a year can you do if your doing work? 

@Steve Wilcox  

Very well said, I don't market at all to investor looking to flip, mostly because I understand that they are trying to generate the most bang for there buck, I will however offer advice and even try to get them over to one of my own remodels so that they can get a visual for what it's like to take a house down to the bare studs or even see the foundation form work be done. Fix & Flip is a different beast than tear down and rebuild.

The more one learn, the more confidence you create.

I agree with @J Scott  100% about the time element.  Time is a very valuable commodity to me.

An awesome book for anyone thinking about working IN their business is The E-Myth Revisited by Michael Gerber.  He explains the difference between working IN your business versus working ON your business.  It is good to be educated about the process, but as far as doing the work yourself, you will never be able to expand exponentially if you do your own renovating.  Find people you trust.  That is the most important piece of the puzzle.  We have 3 flips going on simultaneously right now and we could never do that if we were doing the work ourselves.

901-545-9092

Here is one example where I can rehab for low costs - remnants.  

I am working with Mehran on rehabbing one of his rentals and I got a remnant for the kitchen floor which needed 8x15.  So I got a remnant at 12x16 and rather than pay extra for the bathroom floor I had the contractor use the remainder for the bathroom floor and there was enough left over to put down on 3 closet floors as well. This really pulled together the entire house.

On another property (mine) I had to put in a new floor for a bedroom and the size was 12x14.  (I want to stay away from carpet if possible.)  I went to the store and checked out the remnants area.  There was a 12x15 piece of heavy vinyl flooring in a wood plank look for $109.80.  

If you buy new, you typically pay more.  But if you use remnants wisely, you can save money.

Originally posted by @Don Crandell :

Karen you are having a lot of work done by contractors that you are quite capable of doing yourself, that is if you want to keep costs down. I have 25 years of construction experience and know that about 50% of the work performed by contractors and sub contractors can be handled by determined homeowners, but you have to know your limitations.

Get rid of your fear of electricity and learn that being shocked is not that big of a deal. Here I am ONLY talking about replacing switches, outlets and installing fans and lights. I am NOT talking about wiring a circuit breaker panel, or doing a drop from the power line. I have been shocked well over 1,000 times and am still alive. 


This is horrible advice.  120 volts can kill you.  All it takes is being grounded on one arm shocked on the other.  You get lucky most of the time.  All it takes is that one time the AC cycle is just right with the rhythm of your heart to kill you.  

I'm not saying a DIYer can't change some plugs but electricity is not something to take lightly.

Hey, John it's not the volts it's the amperage. There is a huge percentage of the population who are scared stiff of electricity. I stand by my statement, I have been shocked well over 1000 times, including last week when I had to replace a GFI which had gone bad. The slight tingle told me that my electrical system had not gone bad, which had been my fear, I had thought that I was going to have to run new wires through the wall. Lucky for me, it was just a warn out GFI. 

Water can kill you also, if you drink too much water in a short amount of time you will land up with water intoxication and DIE. So I suppose you would warn people to stay away from drinking fountains because of the potential danger.

Why worry about something which has a snowballs of a chance of happening.

Karen my best tactic for saving money has been finding a plumber and a electrician who work solo.  They don't have the overhead of a company, and cost significantly less.

Originally posted by @Dan C. :

Karen my best tactic for saving money has been finding a plumber and a electrician who work solo.  They don't have the overhead of a company, and cost significantly less.

This is a good tactic as they are usually involved in the more expensive work. So how do you come across these guys?

If you're going to be doing multiple rehabs at a time or a lot back to back I would find a small contractor who you trust and tell them they can do all of your work for all of your flips and most of the time they will give you good rates since you give them so much business. But still shop around first.

Originally posted by @Don Crandell :

Hey, John it's not the volts it's the amperage. There is a huge percentage of the population who are scared stiff of electricity. I stand by my statement, I have been shocked well over 1000 times, including last week when I had to replace a GFI which had gone bad. The slight tingle told me that my electrical system had not gone bad, which had been my fear, I had thought that I was going to have to run new wires through the wall. Lucky for me, it was just a warn out GFI. 

Why worry about something which has a snowballs of a chance of happening.

We are upgrading the electric to 200amp on our Lake-house in 'Cow country'. 

We had the utility roll the wires back to the pole & we are installing a new weather head, mast, service wire, meter box & panel. So I emailed the local town for permits etc. (They never answer the phones).

Part time Building Inspector "Don't need one"

Me "So you're telling me the home owner can just do this himself"

'Yepper'

"Isn't that dangerous"

'haven't lost anyone yet'

Estimated savings $1500!!!

(Thank God I took that minor in Electrical Engineering).

@John Wielgolinski How to you balance the desire to give an upscale tile look with accent tile with trying to appeal to all buyers? I just paid $20 foot for some custom ordered white crackled arabesque? shaped accent tile to compliment polished white 12x24 and now I am afraid to use it...having second thoughts about it looking more bohemian than geometric. The high end homes here use accent tile in all the models but the spec homes have none. Can it be cost? These are 375-500k homes. Or is it just too risky to add even small details that are not guaranteed to appeal to everyone? Thanks for your opinion :-) (I am not in that market, but am doing my own home with plans to sell soon...but am really curious)

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