Rehabbing Tips

This section is geared towards the first time rehabber.

There is obviously a LOT to know when it comes to doing your first rehab but don't be scared of any of it!
You should know going in what your budget is going to be and you don't want to go over it.
Are you going to be able to provide the supplies and just pay for labor?
Are you needing contractors to supply their own materials and labor and you are going to pay them when their part of the job is done?

Let's use a scenario similar to one we have had in the past.
OK, so you got your loan approved and got your property closed. You told the lender you had some funds in the bank to start the rehab but you really didn't have all of that money (Oops, problem time)

How are you going to start the rehab?

How are you going to pay people? (and you better be able to pay them or you're in for some "problems")

Let's assume this is your first deal and you don't have contractors yet.

1) Be your own General Contractor! You don't need to be paying GC prices! You will be there every day to oversee the project so all you need is individual contractors to perform specific tasks.

2) If you don't have people lined up, put an Ad on Craigslist (actually, do this even if you do have people lined up, you'll get more bids) Put it in the "Jobs" section under "Skilled Trades" Tell people what you need. List the jobs available at the property, explain that the project is an investor deal and that you are NOT looking for retail prices! Put in the Ad that you will meet with all contractors between say 10am and 2pm on a certain day.
Get ready for a crazy day!
Trust me, you'll have dozens of people show up, you want all their bids in writing emailed to you within 24 hours of them taking measurements etc. at the property. Your Ad should have also told people that you work on "draws" from your lender (most will know what that means) and explain that they will get paid in full 3 or 4 days after their part of the job is complete. Most people will understand and be OK with this, if they are not, use someone who is! Oh, and make sure they are licensed and insured too.

3) IMPORTANT: Get ALL contractors to sign a "Final Lien Waiver" when you pay them!

This is a simple document you get your guys to sign to say they have been paid, the work has been done and all parties are happy. It simply protects you against anyone coming back later saying they didn't get paid or you promised them more money or you promised more work etc.
If a contractor is doing a job like plumbing all rooms, it is going to take a week and you are able to pay him half his money during the work, have him sign a "In Progress Lien Waiver" too.

Basically, when you pay someone (especially if it's cash) have them sign a lien waiver, the last thing you need is to find out later that a contractor you upset for some reason has put a lien on your property.

4) Don't be afraid to get rid of someone! If you feel that someone is not performing, is doing a bad job, doesn't really know what he's doing or is trying to jack up his price, don't be afraid to pay him what you owe him to date and get him out of there!
YOU run the job, he doesn't! If he is being a negative influence on everyone else, ask him to leave.

5) Get Bids on Labor: When you get to a point where you need multiple jobs done around the house and some guys that did another job there want to do it, have them bid it! NEVER pay a daily rate!
It doesn't matter how long the list is, have them bid it within your budget. If you pay say two guys $100 a day, they will ride the clock and stretch out those days to as many as they can (been there, done that)
Get a bid and let them do the work as fast as they want for the same money, daily pay rates are a definite NO.

6) Be There!: You've seen the TV shows, where the guy who owns the flip house is hardly ever there right?

He's an idiot and deserves to have it go wrong!
If you are going to start a rehab project, you better be there, every day until it's done. Nobody has your back with these things, it's your house so protect your own interests and make sure you are there to oversee the project.

7) Get In, Get Out: You better have a plan when you start. Please, don't be going into a project guessing what to do first. Most of it is obvious but do you want to be laying floors before painting? Do you want to be laying carpet in the master bedroom while the bathroom has a demo crew working? Of course not.

Plan out your flip, make sure you know who's doing what and when and have a strategy for getting in and out in the most cost and time effective way possible.

There are many other things to know about doing your rehab.
If you are in the Orlando area and want some additional help, let us know. We have a program where you can do a flip with us and we have another where we assist you with the purchase and rehab of your own property.

There are also a ton of good links online for rehab tips, here are just a couple:

Rehabbing a House from Start to Finish by Steve Cook
Rehabbing Ugly Houses Will Give You Beautiful Profits
Real Estate Rehabbing: Top 10 List
What Will Rehabbing That House Really Cost You?

8 Secrets for Rehabbing Houses to Sell
Rehabbing Houses in 14 Steps

You should also check out YouTube, you'll find quite a few videos there about rehabbing.