Rehabbing a foreclosure

Hi there,

I’m about to buy a foreclosure that needs just about everything, a new kitchen, new ac unit, new floors, attic insulation, lots of drywalling and some bathroom work, I’m meeting a home inspector and barring some structural issues or some show stopper I’m buying the house. The house is intended to become a rental. I did this one time before with a friend that acted like a contractor but it was a BIG mistake. Now if I buy this property I need to have a game plan. My questions are:

  1. Did you go and hire a general contractor? If so where did you look? The only place I can think of semi-reputable is angieslist.
  2. Did you try to manage all the contractors? (I went thru this a bit with the first house but it’s a headache, the good thing is that you learn about the work)
  3. Did any of you hire some designer (mainly colors/design for new kitchen, bathroom, etc), taking into account that it’s going to be a rental property.
  4. Is there some rehabbing manual for rookie investors? The process of rehabbing, step by step.
  5. What should I be considering that I haven’t mentioned here?

I’m buying it for 29,000
Approximate rehab costs: 20,000
Yearly Taxes: 2,400 but seem high for the house, will pass by the city to see why so high compared to other houses of similar size.
Insurance: 1,000

Projected rent: 1,100/month

Any other advice would be very welcomed. The house is in Michigan just north of detroit by the way.

Thank you.


I think your mind is made up to complete this purchase so I won't try to talk you out of it and every man has a right to pay for their own education.

If your construction knowledge and estimating skills are accurate? Your $20,000 rehab budget will be $26,000 by the time you hire and pay for a general contractor. If you know nothing about writing scopes of work, determining critical path schedule or ensuring you are diligent and protect your interests both in your initial sub-contractor qualifications and in requiring retain-age and lien releases.

Believe it or not people found qualified contractors long before (The List) by making phone calls, soliciting referrals, checking references and verifying state licenses and insurance status.

Managing sub’s requires time and understanding of building codes, change orders, the process and where the sub fits in the overall schedule.

Depending on the rental class (A, B, C, or D) quantifies my choices of finishes, most Class A rentals will have granite counter tops, a combination of hardwood, tile or carpet, custom paint with colored walls, white ceilings and white trim. Class B property may have some upgrades of a Class A, with clean lines and down graded finishes.

Class C & D will have generic finishes normally with all white walls, ceilings and trim. In fact a lot of landlords spray, trim, doors and baseboard with all the same paint. A Class C & D property will have Formica counter tops, faux marble vanity tops and pre-made tub surrounds.

I have never hired a designer but rather toured enough properties to determine what’s expected in the subject properties area.

There is a lot to construction and the process of rehabbing, there is no book or manual, tradesmen usually complete a 4 year apprenticeship for their trade and typically carpenters are the primary basis most general contractors start out in. Just the code books alone are inches thick for compliance. Tradesmen know what’s expected and how to stay in compliance because they are taught there profession and continue to work in there profession thus always in basic compliance.

Liability, Liability, Liability!!!

I would be very careful you don’t make the same mistakes you made in your last project!