Advice on managing out of state rehab

10 Replies

Hi all,

I'm curious to get everyone's lessons learned / best practices regarding managing out-of-state rehabs. To start....

- How are you allowing contractors in/out of the property & securing materials?
- Do you have them buy the materials? Do you typically pay 50% upfront? 
My concern here is having materials getting stolen & or a contractor taking 50% and walking.
- How are you keeping up on their progress?
My hope is they would provide weekly updates with pictures, but I'm curious on how everyone else gets updates. 

Thanks,
SL

@Stephen Lynch

Hey Stephen, I have done this a few times and here are a few suggestions:

1. Have someone who will verify all work. This could be the agent who sold you the house. The property manager who will manage the house.

2. DO NOT PAY BEYOND THE WORK PERFORMED!!!!

3. SEE #2

4. Make sure the contractor signs the SOW. Your scope of work needs to be extremely detailed.

5. If you can, find a project manager instead of a contractor. Contractors want to fix more stuff. Project managers want to have a successful project.

6. SEE NUMBER TWO

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@Stephen Lynch

- How are you allowing contractors in/out of the property & securing materials? This is where a project manager or General Contractor would come in handy. They can put a lock box on the property. Changing the code after getting quotes and choosing your contractors is recommended. "Boots on the ground" that you can trust is one of the most important aspects of long distance rehabbing. I've heard of people paying their agent a Project Management hourly rate for doing this. 

- Do you have them buy the materials? Do you typically pay 50% upfront? I recommend you have your contractor purchase and manage any and all materials. I work for a general contractor and we've taken payments several ways. 1/3 (Contract signing / down payment), 1/3 (Upon start of services), 1/3 (Upon completion of project). We've also worked with Hard Money lenders and they will not pay until the work has actually been inspected and signed off on. But, this usually costs the Owner a couple hundred dollars for each draw. 

- How are you keeping up on their progress? Ask, ask and ask some more. A good project manager will give you weekly updates, but it never hurts to ask "Hey, where are we at?"

At the end of the day, interview and find yourself a trustworthy local to build a relationship with. Referrals and 'word of mouth' are some of the best to start with on here. Compensate them to where they will work hard for you and will want to put your projects at the top of their list. Always work with licensed/insured contractors and search the internet for reviews on them. 

Thanks @Troy DeLong . Looks like I found a PM that would be willing to manage the property for a 10% mark-up on the rehab. Assuming they have access to trusted and more affordable contractors and I don't have to manage the rehab (as much) it seems like a fair trade off. 

@Stephen Lynch Can you elaborate on how did you go about finding a PM? Do they have any experience in rehabbing house or just your ears and eyes. Or is he actually hiring and negotiating with the GC on your behalf. I posed a similar question elsewhere about moral hazard of flipping from afar where there is a bigger risk of being ripped off or just scammed outright. 

I found the PM through my agent. They manage a ton of properties and therefore turn a ton of properties. In this case they have a ton of great relationships with contractors who are constantly performing interior refreshes (kitchens, bathrooms, floors, paint etc.) which is usually the rehabs I’m targeting. I avoid foundation issues, mold, termites etc. until I get a little more experience  under my belt. I think it’s a win-win since they will make 10% on the rehab, I get to be more hands off and they will get to manage the property at the end of the rehab. That being said, we haven’t even started yet so I’ll report back the results. 


@Stephen Lynch

I'm involved in this in my market for OOS REI and I find that it's where your thread ended that matters the most - having someone who is an independent party verify all work performed.