I will be getting into my first rehab project in the near future and have established a good relationship with a realtor who knows my market very well and has an eye out for pre-foreclosures, foreclosures, etc. She asked me who was going to be doing my rehabbing for me and I said that I was going to contract it out. She told me that I was better off doing it myself or not get involved in rehab. What? I know there are people just like myself who would contract all the work out and still make a nice profit. Has anyone else had this said to them? Seems like a no brainer that if I due my homework on a property, buy it right, and have the funds to contract out the work, then I should be ok. Your comments are appreciated,
Work smart and not harder. I have been told this over and over and am just now starting to use it. When I first started i wanted to do it all to save money and maybe with a helper or two did a lot of rehabs. I just finished a 31 unit rehab and it was tough going for a while. Still I wanted to be cheap and hire guys that I knew to do jobs. Found out they were messy and more costly than just subbing it out plus more trouble for me to boot. I had to go get every part they needed and all I did was constantly go to Home Depot and Lowes.
If you need sheetrock hung hire a sheetrock crew that can do it faster and cheaper and a lot better than a carpenter. This is true with painters, tape and floaters. wallpaper hangers and all the trades as well. You may want to be the general contractor and hire all the subs and save a little there. Generals get at least 10 to 15 % profit as well as some overhead expenses as well.
I have been doing rehabs for two years and I will soon be to the point that I don’t have to keep working as hard as I am. It is still important to have a good idea what it costs to complete a certain job or task. One of my biggest mistakes I made was hiring stucco guys to a sheetrocking job and I paid them by the hour! DUMB, DUMB, DUMB, I havn’t made that mistake again.LOL You can make money by not doing the work your self, because you will save so much time. There are some things that I don’t mind doing because it’s so easy like putting down the Hardwood floors. Contractors typically bid that by the square foot and around here they want a good price and it’s not that hard to do.
Don’t take the comment from your realtor to personally, I am sure they have seen a number of people try and fail because they did not have the proper funding lined up. Your going to make mistakes just don’t make the same one more than once.
I’m an agent here in the Northern Virginia area and also involved in rehabbing properties. Ask your agent to provide you with a list of comparable sales for the target neighborhood going back atleast 3 months. Use these figures to determine a price range you could resell a comparable property for.
I think it’s important as you are writing up the offer to purchase that you include a feasibility study period (15-30days). This period will allow you the necessary time to collect contractor estimates, prices for materials, home inspection, etc. Know the budget you have to work with. There is no need to load the house with high-dollar upgrades, use basic appliances, cabinets, fixtures, etc…just make it clean and attractive.
Next get a good project management package like MS-Project and identify every task that requires attention. Create the time table and deadline. Try to start marketing the property for sale after you have added the necessary curb appeal. You might get lucky and find a qualified buyer that is ready to buy your property at, near, or before your scheduled deadline date.
After purchase if you decide to go with a contractor that provided a bid, write in a clause on that agreement that states something like “said work to be completed on June 22, 2005 at 5pm. There will be a $50 charge per day to the Contractor for everyday after this date until the job is completed”.
Just about everything is repairable however the best rehab candidates only require cosmetic improvements/landscaping. I would personally avoid any properties that have foundation problems. They can be quite costly. Good luck to you.
Do you use your own standard contract when dealing with contractors? If so, is it hard to find contractors that will accept that as opposed to using their own?
Sometimes they don’t want to accept our contract stating that their contract/bid sheet is all that is needed. I just tell them that this is how my partners and I conduct business and it is of no reflection on them. The verbage is standard and as long as they fulfill those stated terms they have nothing to worry about.
There are some contactors out there that you DO NOT want to deal with…this helps filter some of them out. May or may not work for you but it’s what we choose to use to protect our investments. Good luck to you.