Rehab Pitfalls...coulda shoulda woulda
Real Estate Investor · Raleigh, NC · Member since 2009 · 10 posts · 4 votes
Hello Everyone,
I would like to hear from the new to seasoned investor about the rehab pitfalls you have run into. That One thing you wish you had of known before you started or that "A-HA" moment. Things that would have saved you time or money.
Try to keep it short but informative, I hope everyone learns something. Thank you
Chris Sills
Pitfall 1: Hire a thorough inspector to go through the place after you've rehabbed it to give you an idea of what a buyer's inspector is going to find. Try to repair as many of the findings as possible to minimize the "red flags" to potential buyers. Inspectors flag the goofiest things (i.e. bird nest in attic is a health hazard, etc.) that can absolutely kill a deal especially with a first-time homebuyer.
Pitfall 2: Don't ever tear into a wall or ceiling unless you absolutely have to. Use paint, tile, texture, whatever to make walls look nicer, tear them down as last resort. All these flipping shows love to tape people with sledge hammers ripping walls down. Usually it's not necessary and has the potential to expose a lot of problems that would have been out of sight/out of mind had the wall never been opened up. I tore a wall down in one of my rentals to learn that I now had to bring the entire room up to code, meaning new arc-fault breaker, new 3 wire romex everywhere back to the breaker box, additional outlets to reduce spacing between outlets, wired in smoke alarms, etc. What I thought would be a small wall project exploded into a huge electrical project due to code. Know your code before starting any major rehab!
Pitfall 3: rent a large roll-on dumpster and get it as close to a door or window as possible before you start rehab. This will save tons of time walking back and forth and keeps the place as clean as possible during the rehab. I made the mistake of "saving money" by not getting a dumpster a couple of times and I assure you that you will pay for it in the end with labor and dumping costs.
Pitfall 4: Do NOT let a realtor or anyone else associated with selling retail properties look at the place before the rehab is at least 95% finished. For some reason, Realtors just cannot imagine what a place will look like when it's finished. Don't try to get a market value estimate until it's finished, because it will almost certainly come in low. I made this mistake and just wasted my time along with the realtor's. I got an estimated value 20% after rehab being finished than I did during the rehab (even assuming that it would be finished to retail quality). The property then sold in 3 days for this higher value.
Pitfall 5: Reuse cabinets whenever possible, but do not paint them by hand with a brush or roller (this takes forever to get everything inside the cabinets painted.... days....). Spray them with a professional quality paint gun (or hire someone else to do it). You can paint cabinets white inside and out with 2 coats with just a couple hours of labor. This can save thousands of dollars vs. buying new cabinets and can actually look pretty good depending on the price of neighborhood your selling in.
Pitfall 6: Do not ever buy cheap paint. Cheap paint is very expensive in the long run. You will use more of it, be forced to put on multiple coats (as many as 4) and end up with crappy paint on the walls. Buy the good stuff right away and put 1 coat on if possible. I like the Behr stuff with primer in it. Works pretty well with 1 coat.
Pitfall 7: Don't install carpet until just before the first open house. Keeps it clean and new carpet smell is great for showings
Pitfall 8: Whenever possible, keep the baseboard trim, label them so you can remember where they go, paint them and reinstall with a pneumatic brad nailer. Trim can be expensive and usually painted trim looks pretty good. Also, the old trim is already cut to length for you so it reduces labor. Paint with a professional-grade air system.
Pitfall 9: Do not try to laminate over the counter top or the cabinets. Buy a new countertop that looks like granite they are very cheap ($200) and look quite nice. They are also very easy to install. Don't laminate cabinets, just paint them or replace them.
Pitfall 10: Don't do mudding/taping of sheetrock yourself. This can be very time-consuming and is not fun. A professional can do it 5 times faster and 5 times better for $10-$20/hr. Go live life and let a skilled professional do the dirty work.
Wow, I didn't realize I had made that many mistakes, yikes! That just means I have less to make in the future. If this saves someone else from making a mistake, then mission accomplished. Good thread!
-Jaden
Plumbing/Home on a Slab
It was something I hadn't even thought about. But check, double, then triple check your plumbing when you are working with a property on a slab.
I was lucky enough not to have a problem but I had some plumbing issues on my last property and the closer we followed the problems to the foundation the more I could picture the jack hammers and checks coming out to get at the pipes cemented in.
I will be watching out for this in the future.
Three things to keep in mind:
1. It will cost more than you think
2. It will take longer than you expect
3. It won’t sell for as much as you hope
Rehabbers by nature tend to be optimistic. Keep those things in mind and be conservative in your assumptions. If you are wrong and it is cheaper, goes faster, and sells for more it’s just more money in your pocket. If things go the other way it can be a financial disaster.
:cool:
When dealing with contractors, the first time they don't show up when they promise (and don't call), fire them with no second chances.
Likewise, if a contractor schedules a time to give you a bid and doesn't show up on time without calling, don't waste your time.
Plan on "touching" every surface. That ceiling that didn't need painting now looks like crap after surrounding it with new lighting, freshly painted walls and a nice hardwood floor. The bathroom tile on the walls wasn't that out of date until you replace the tub, fixtures and vanity. etc.
Don't forget about the little things like faceplate covers, new light fixtures, new door hardware, new electrical outlets to replace faulty outlets, etc. These are small amounts for each, but they all add up to a surprising sum when you are all done.
And these are the things that really make your place look clean, bright and new...
I always budget $500 for new outlets, outlet covers, switches, switch-plates, HVAC registers/returns, doorknobs, doorstops and mini-blinds.
Do your own due diligence.
I had a homeowner tell me the HVAC was shot and has been off for 3 years. He boarded up the windows and put in 3 window AC units and sectioned off half the house. He told me he was quoted $6700 for replacement.
I called my HVAC guy to take a look. He changed the thermostat and refilled the freon. 30 minutes later I had AC.
Cost me $187 which I thought was a little high. :)
A new $30 thermostat solved the problem...
I'd say the best piece of advise i can give anyone is to do research of various aspect of construction/remodeling, so you know the terms and lingo. GC's are very very smart people when it comes to capitalizing on things like this. if they get the slightest idea you have no idea of what it takes to retile the bathroom, change the furnace etc they'll make every little thing seem like the end of the world which in turn will result in stress and you losing control of your rehab. You don't need to get a construction management degree; but just know enough about the various elements of the rehab so you can speak in the same terms as the folks you'll be hiring! it'll save you money, guaranteed.
Get at least several bids from contractors. I have seen bids from GC that varied from $20k to $45k for the same job!
I cannot speak for other people but that was what I experienced!
Pitfall 1: Hire a thorough inspector to go through the place after you've rehabbed it to give you an idea of what a buyer's inspector is going to find. Try to repair as many of the findings as possible to minimize the "red flags" to potential buyers. Inspectors flag the goofiest things (i.e. bird nest in attic is a health hazard, etc.) that can absolutely kill a deal especially with a first-time homebuyer.
Pitfall 2: Don't ever tear into a wall or ceiling unless you absolutely have to. Use paint, tile, texture, whatever to make walls look nicer, tear them down as last resort. All these flipping shows love to tape people with sledge hammers ripping walls down. Usually it's not necessary and has the potential to expose a lot of problems that would have been out of sight/out of mind had the wall never been opened up. I tore a wall down in one of my rentals to learn that I now had to bring the entire room up to code, meaning new arc-fault breaker, new 3 wire romex everywhere back to the breaker box, additional outlets to reduce spacing between outlets, wired in smoke alarms, etc. What I thought would be a small wall project exploded into a huge electrical project due to code. Know your code before starting any major rehab!
Pitfall 3: rent a large roll-on dumpster and get it as close to a door or window as possible before you start rehab. This will save tons of time walking back and forth and keeps the place as clean as possible during the rehab. I made the mistake of "saving money" by not getting a dumpster a couple of times and I assure you that you will pay for it in the end with labor and dumping costs.
Pitfall 4: Do NOT let a realtor or anyone else associated with selling retail properties look at the place before the rehab is at least 95% finished. For some reason, Realtors just cannot imagine what a place will look like when it's finished. Don't try to get a market value estimate until it's finished, because it will almost certainly come in low. I made this mistake and just wasted my time along with the realtor's. I got an estimated value 20% after rehab being finished than I did during the rehab (even assuming that it would be finished to retail quality). The property then sold in 3 days for this higher value.
Pitfall 5: Reuse cabinets whenever possible, but do not paint them by hand with a brush or roller (this takes forever to get everything inside the cabinets painted.... days....). Spray them with a professional quality paint gun (or hire someone else to do it). You can paint cabinets white inside and out with 2 coats with just a couple hours of labor. This can save thousands of dollars vs. buying new cabinets and can actually look pretty good depending on the price of neighborhood your selling in.
Pitfall 6: Do not ever buy cheap paint. Cheap paint is very expensive in the long run. You will use more of it, be forced to put on multiple coats (as many as 4) and end up with crappy paint on the walls. Buy the good stuff right away and put 1 coat on if possible. I like the Behr stuff with primer in it. Works pretty well with 1 coat.
Pitfall 7: Don't install carpet until just before the first open house. Keeps it clean and new carpet smell is great for showings
Pitfall 8: Whenever possible, keep the baseboard trim, label them so you can remember where they go, paint them and reinstall with a pneumatic brad nailer. Trim can be expensive and usually painted trim looks pretty good. Also, the old trim is already cut to length for you so it reduces labor. Paint with a professional-grade air system.
Pitfall 9: Do not try to laminate over the counter top or the cabinets. Buy a new countertop that looks like granite they are very cheap ($200) and look quite nice. They are also very easy to install. Don't laminate cabinets, just paint them or replace them.
Pitfall 10: Don't do mudding/taping of sheetrock yourself. This can be very time-consuming and is not fun. A professional can do it 5 times faster and 5 times better for $10-$20/hr. Go live life and let a skilled professional do the dirty work.
Wow, I didn't realize I had made that many mistakes, yikes! That just means I have less to make in the future. If this saves someone else from making a mistake, then mission accomplished. Good thread!
-Jaden
The only other thing I can add is to get the date codes for the HVAC systems off the web and budget for repair or service if it's close to 10 years old and budget for replacement if it's 15 years old.
Excellent info from the others in this thread.
Great info from everyone. Thank you guys for sharing your experience.
The biggest issue I have to remember, and remind my partner of when we rehab, is that we are not going to live in the house, and we only need to do and spend what is necessary to maximize our profit and to sell the house quickly. On our first rehab, I went back and forth on whether or not to replace all of the windows, which were in bad shape but still functional. I got quotes, and they would have cost about $6K installed, and would have raised the sale price from $80K to $86K to maintain my profit. I went with offering the lower sales point with as-is windows, and sold the house in a week. The buyer didn't have a problem with the windows and was more interested in getting the much lower price. Also, $80K was his price threshold, so he wouldn't have been a buyer at $86K. So my first big lesson was make the house look as nice as you can and repair or replace if needed, but it's more important to offer a great deal.
Thanks for all the votes guys. That's my first 10+ post!
BTW - when you get 10 votes on a single post, you also get an award for "Genius"! Check your profile to see it.
Ok so here is an odd one. I had an my latest flip open for the first time this past Sunday and without exception each person commented on all the crap cluttering up the neighbors overgrown yard (otherwise a very nice well kept neighborhood). So my wife suggested I just talk to the neighbor because maybe they just can't do it or afford to have it done. I talked to the elderly neighbor the next day and she was thrilled with my offer to have my landscaping guys spend some time helping her get her yard in shape for the spring. Two hours latter I no longer have an eyesore next door. I will continue to pay for her lawn care until I sell the house.
So I coulda woulda shoulda talked to her prior to having 7 showings and an open house.
To add to mike V's comment just prior to mine, on the one I'm working on rehabbing now, we are paying to have repairs done on the house next door to help better control water flow - I want to keep it away from my house :wink:
[[[.....the little things like faceplate covers...]]]
No disagreement from me, but I always pinch every penny twice before letting it go.
You have to take the face plates off to paint. Take them off and drop them into a bucket of water and a good grease cutting cleaner, like Greased Lightening. Let them soak until painting is done, give them a good swish in the water and rinse them off. They'll look brand new.
Sometimes a light fixture in good condition can be updated by simply replacing the glass shades. It's worth considering.
Usually new hardware in the kitchen is best, but occassionally, the hardware will be attractive and the soak in the bucket will work on them, too. Sometimes a quick spray with a spray can will modernize them.
I had an historic house with wonderful complex drawer pulls that had paint splattered all over them. Into the soak bucket for several days, a little rubbing, and they came clean and lovely. I could never have purchased pulls that looked so perfect for the house without spending a fortune.
Start watering the yard as soon as you start work. You will be there every day to do the watering. If you wait until the house is finsihed and lay down expensive sod, you'll have to go by every day to water while the lawn and plants get established.
Many other great suggestions to avoid pitfalls. I will also add:
Dumpster-great point to get it as close to the door, window (or garage entrance) to avoid long walks for the cleanouts - I will add to get the demo and clean-out done in the first day or two whenever possible, fill the dumpster and have it picked up right away. Nothing invites the city inspector for a visit more than a dumpster in the driveway!
Avoid taking down walls or drywall - if it can be avoided, this is a good suggestion but many times, I have increased the value of the home be rearranging interior walls to create a better flow, or better living space. Many other times, new sheetrock was in order as it is easier to put up full sheets than repair 15 holes. It may be a bit more in material cost, but less labor intensive and therefore less expensive.
Always run a permit check (title can do this for you or you can go to the city planninjg department) BEFORE you buy the home. Know what you are "inheriting" to better give you an idea of what you may or may not have to fix, demo, or get a permit for.
Insurance - do not skimp on insurance to save a buck and make sure you get the right kind of insurance. Most insurance policies will not pay out if the home is vacant and stating it is not vacant when in fact it is during rehab is not only fraud, it will get you a $0 paycheck if something goes wrong! Buy a policy that covers for vacant properties and get a large liability umbrella included. (Better to be safe than sorry later) :idea: