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.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
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.
- 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.
- 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.
- 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.
- 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…..
- 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.
- Finalize 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.
- 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.
- 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.
- 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.