Best book about managing a rehab (and keeping it on budget)?

10 Replies

Can anyone recommend a book or other resources that I can use to educate myself on systems and processes to improve the rehab process, specifically related to budget?

I have done 4 rehabs now (buy and hold), and I've found that my rehab management skills, while improving, still need some work. In general details are not my strong suit, and I don't have a good system for managing expenses and keeping the project on budget. I really want to do more BRRRR's, and maybe even some flips, but I'd like to get really good the management side of it first.

I believe it starts with getting an accurate rehab budget to begin with (this was the problem on my first BRRRR, a full gut 4 plex), so I'll be buying J Scott's book on estimating rehab costs as a start.

Any insight would be appreciated!

@Whitney Hutten Yes I am using GC's, but' I don't think they are involved early enough in the process. I used this GC on two of my projects where now I'm seeing that his systems were a big part of the problem.  He won't give a bid on the entire project... he just gives me a "not to exceed" bid for labor only (although he always exceeds it by quite a bit) and leaves the material estimating and purchasing up to me. He also requires that I pay those labor hours at the end of each week. In retrospect that is a terrible arrangement for me, but I didn't quite realize this until after the second time working with him. While that was part of the problem, I realize that material costs and timelines increased dramatically due to Covid. I just didn't have a good system in place to track expenses in real time so I could pivot before the budget was blown through.

My more successful project was using a different GC (not during covid), and he did a great job. For that one I walked him through the project with the scope of work in hand (derived from our design changes and the inspection report), and had him bid it out based on my scope. He bid the entire project and stuck to it pretty well. The only variance was change orders on my end. 

This is how I believe it SHOULD work (please correct if I'm wrong here):

1. Get inspection during due diligence

2. Create s.o.w. from inspection report

3. Get a GOOD GC to create a bid based on the s.o.w. before you close

4. GC gets progress payments for work that is completed at certain intervals (either halfway, 1/4" etc., or after bathroom, kitchen, etc). 

 I think step 4 is where I mess up. 

As far as budgeting and staying on budgeted, J. Scott's The Book on Estimating Rehab Costs is definitely worth reading. I haven't read his book on flipping houses but I think that has some good stuff on managing the rehab. You can find them here: https://store.biggerpockets.co...

Originally posted by @Andrew Syrios :

As far as budgeting and staying on budgeted, J. Scott's The Book on Estimating Rehab Costs is definitely worth reading. I haven't read his book on flipping houses but I think that has some good stuff on managing the rehab. You can find them here: https://store.biggerpockets.co...

Hey Mr. Syrios. This is random but you wrote a really good article a long time ago on bigger pockets about creating a scope of work: https://www.biggerpockets.com/...

I really like the checklist form you created for the SOW. I would love to see a full version of that if you still have it! Thanks.

Originally posted by @Duane Alexander :
Originally posted by @Andrew Syrios:

As far as budgeting and staying on budgeted, J. Scott's The Book on Estimating Rehab Costs is definitely worth reading. I haven't read his book on flipping houses but I think that has some good stuff on managing the rehab. You can find them here: https://store.biggerpockets.co...

Hey Mr. Syrios. This is random but you wrote a really good article a long time ago on bigger pockets about creating a scope of work: https://www.biggerpockets.com/...

I really like the checklist form you created for the SOW. I would love to see a full version of that if you still have it! Thanks.

 Thanks Duane and sure thing. I'll DM you and send a colleague request (we have to be colleagues to share docs).

@Andy Whitcomb If step 4 is where you feel you messed up, you could give say 10% of the budget upfront for materials purchase. Then payout when certain milestones are met (ie. 100% complete on rooms or line items, not perceived progress). You can also incentivize when they come in under budget and ahead of time as well. David Greene has a great process outline in the BRRRR book. Withhold the final payment (say 25-30%) until the work is completed and fully signed off on. Have all of this in writing on the itemized bid, then there isn't a question on what is to be done.

@Andrew Syrios I have J. Scotts book on estimating rehab costs arriving today, I'll also check out his book on flipping houses. I haven't read any of his books yet, but I know he's a smart guy with some great systems, so I'm excited to see what wisdom I can glean from those books.

@Whitney Hutten Thank you for your comments, you've helped me to sort out where I'm going wrong and where I need to focus my energies. It's really about being intentional and proactive rather than reactive. Usually my projects go like: "Ok, i just closed on a new property, now I need to find a contractor last minute..." and of course the guy available last minute is not the best. This all goes way smother and according to plan if you take the time to do things in the right order. 

Here is my revised list of steps for a successful rehab:

1. Get inspection during due diligence

2. Create s.o.w. from inspection report

3. Get a GOOD GC to create a bid based on the s.o.w. and agree to MY progress payment/deposit terms, included in the signed bid.

4. GC gets progress payments for work that is completed at certain intervals per the terms written in the bid.

I'll check out David Greene's BRRRR book as well. Thanks again for your help!

@Andy Whitcomb Looks great. I'd add in 1 step before #1 (if you have time), have a qualified professional (ideally a contractor) walk the property with you to give you an idea of what you are in for before you put in the offer as far as budget. This might cost you $100 or so for their time. A realtor or PM with a rehab background could possibly eyeball this as well. But that way you have a general sense before you offer if it's something to go for. It's all about learning and adjusting!