9 Steps to Follow When Tackling a Large Rehab Project

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Rehabs are often a major part of any real estate investing venture. After all, a property in need of some sort of rehab can often be bought for a discount, and discounts are what we investors look for.

Rehab jobs can come in all shapes and sizes. Some are relatively small and may only include a few coats of paint and perhaps some new carpet. These small ones are easy to plan out and coordinate. Often there will be only one contractor (perhaps you!) doing the job. It will be easy to schedule, review and get that rehab job done.

Other rehab jobs however can be rather extensive. These types of rehabs might include a fire restoration or a total gut and update. They require numerous trade persons, permits, plans, payment schedules and an almost unending number of small decisions.   These rehab jobs are not for the faint of heart nor are they generally for the novice. With some experience and planning, however, large rehabs jobs can be fun to tackle and can produce wonderful results, both in terms of product and profit.

Related: 8 Simple Tips for Managing Contractors Without Losing Your Mind

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9 Steps to Follow When Tackling a Large Rehab Project

There are many things you can do to make a large rehab project run smoothly. Here are some suggestions.

  1. Set a Budget – This is first and foremost: you need to be able to make your real estate deal profitable and cash flowing. Setting a rehab budget is one important key to making that happen. Your initial budget can be very general and include a lot of “oops” money that can be allocated later as plans firm up and price quotes come in. Also, it is best to budget high at first and slim things down later on.
  2. Layout and Design What You Want to Do – Sit down and think about what your plans are. Be general at first. Do you want to move walls? Do you want to install a new bath? Does the kitchen need updating? How about the electrical and heating systems? Are they functional? As you layout your rehab project it will begin to take shape and you can also begin to firm up your budget estimates.
  3. Be Specific – Your contractors will need to know specifics in order to get the job done. Just saying that the stove will be about here or the bathroom will be over here will not work. Nor will telling them to just pick out some tile for the bathroom. Contractors need to know specifics. So tell them exactly where and how you want things. Draw out what you would like, to scale if possible. It does not have to be fancy. A pencil drawing will often do. Have a product list for tile, fixtures, carpet, etc. The more specific you can be on the front end, the better off you will be on the back end and fewer mistakes will be made throughout the process.
  4. Get Quotes – Now that you have drawn up your specific plans, get quotes for the work you want done. You may have the best-laid plans in the world, but may not realize just how much they are going to cost to be implemented. Your contractors also will see things that you have likely missed or were not aware of. Things such as plumbing or electrical systems that are in the way, or load bearing walls that cannot be moved without great expense. They may also know about code issues. Whatever the reason, the quotes from your contractors may make you want to…..
  5. Reconfigure Your Plans – Sometimes even the best ideas have to be reworked. Sure, anything is possible with unlimited dollars, but you do not have unlimited dollars because you set a budget as your first priority. You may not be able to move that wall or add that walk in shower. You may also have to tone down your materials a bit or shift funds from one part of the project to another. Sometimes you may have to reconfigure your plans several times before you come up with one that works.
  6. Rehab Project 9 StepsFinalize Your Plans – Once you have reworked them, it is time to stop thinking about them and firm them up. Again make them as specific as possible so you can avoid headaches and speed bumps later on.
  7. Have a Contractor Meeting – I like to gather all my contractors together at the beginning of the project and get everyone on the same page. I go over my plans and introduce everyone to each other and exchange phone numbers. Some of them, after all, are going to be working together and closely coordinating various aspects of the rehab project. Having such a meeting is a big help and will take you out of the “middleman” role.
  8. Talk to The Neighbors – Talking to the neighbors is one of the best things you can do with any large project. People are naturally curious. Plus rehab projects can be loud and messy which can get on folk’s nerves. A simple knock on the front door to introduce yourself and tell them what you are doing will go a long way. Hand them a business card and ask them to call you if they have any issues or concerns. Be friendly and courteous and they can become some of your best watch dogs and allies as the project goes along.
  9. GO! – Your plans are in place. Your budget is set and your contractors are lined up. Now pull the trigger and watch your project come to life.

How do you manage a major rehab? Care to share your experience or ideas? Please do with your comments.

About Author

Kevin Perk

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

7 Comments

  1. Kersten Harries

    Terrific list!
    As an architect, I must put a plug in for how much one can assist in this process, especially for steps 2-7.
    I know most people assume hiring an architect is an added cost that will break their budget, or you only need to hire an architect if you require construction documents for permits, want a custom high-end home, or it is a larger project. Though the added upfront cost of hiring an architect can be an important long term investment and help save you time and expenses in construction costs because they can help you arrive at better design solutions that add more value for less money; and with detailed drawings and specifications, communication with contractors will be smoother and their quotes more accurate with less surprises later.
    Also, architects are experienced in construction administration and project management, so if you prefer to have assistance managing subs during the rehab, that is another role they can fulfill. By having a presence onsite during construction they can assure that works are executed as planned, and problem solve on the spot if surprises arise. You can remain the good cop and let them be the bad cop with the contractors.

    • Mindy Jensen

      I will second Kersten’s vote for an architect. We used one for the first time a few houses ago to help us figure out what to do with a wompy back wall facing a lake, and a weird space in the front of the house. The architect didn’t add much cost to the project, but added a tremendous amount of value. The house would not have looked nearly as good, nor would it have sold for nearly as much if not for the help of the architect.

  2. Mindy Jensen

    I would add a timeline to the process. Starting generally at first, and then getting more specific will help you keep your contractors (or yourself) on task. Ask the contractor how long they think it will take to do the project. Check in with them frequently anyway, but about halfway through their original estimate, ask if they think they will be able to keep their initial deadline.

    Know what projects have to be finished before others can be started. Electricians and plumbers have to finish before the drywall guys can start. Electricians and plumbers can work in tandem, but they can’t start before the framer gets done. The finish carpenter can’t do his job until the painter is done and the flooring is installed.

  3. Darren Sager

    I always recommend talking to neighbors first and bringing them a cake. Small gestures like that can go a long way in not having them complain to the town about something your contractor is doing which can shut down your project mid way. Time is money. You’d really be surprised to learn that a cake goes a long way toward helping you get your project done. And when giving them a cake give them ALL your contact info. Cell phone, email, whatever. With that cake chances are they’ll now look out for your best interest and call you if something is NOT getting done that should be.

  4. Andrew Syrios

    “Your initial budget can be very general and include a lot of “oops” money that can be allocated later as plans firm up and price quotes come in.” Very good point.

    I would even say you should leave a contingency in the rehab budget after the bids come in. Especially on big projects, there will always be things you miss. Contractors love their add-ons and change orders. So you should be prepared for them ahead of time.

    Rarely do people undershoot their budgets.

  5. Wendy Hoechstetter

    Great article! As an interior designer, I could not agree more with Kersten and Mindy about the value of bringing in a design professional early on in the project.

    If you are not doing any structural or systems changes, you don’t necessarily need an architect, but definitely at least buy an hour or so’s time from a good interior designer, who can at minimum help you select finishes and materials that go together well and are up to date. A few hundred dollars spent up front on a consultation will be worth its weight in gold, and all the more so when architectural changes are called for.

    The other area in which a design professional can be completely invaluable is in designing a new kitchen. The cost to retain an architect or interior designer for this would be prohibitive for an investment project, unless the budget is quite substantial, but many kitchen and bath showrooms – and definitely Home Depot and Ikea – offer free design services when you are buying their products.

    I would not necessarily recommend this particular route if you were doing your own home, because you will likely want something more personalized and customized, and you will get far better selection and design if you use an independent designer who is not committed to particular product lines, and is likely better trained, not to mention being far better able to find someone whose work style and personality mesh with yours. For investment purposes, however, whatever the in-store designers can come up with will be guaranteed to be better and more functional overall than almost anyone else if you are not trained in kitchen and bath design.

    Studies have shown that kitchens in particular sell the house, so make sure you’re not doing the same boring old outdated thing that everyone else is doing, and make sure it’s functional – including enough cabinetry and a decent layout.

    Just be sure you find someone who clearly understands the difference between doing a project for investment (or staging) and doing one for an actual interior design or architecture client – and who is willing to consult by the hour!

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