We can all buy cheap houses! Can we all rehab them for a profit? People say work smarter not harder so hire it out. For investors they are right to some regard. When it comes to your investment rehab it’s imperative that you choose your construction team wisely. Rehabs are labor intensive and your contractor or project manager is going to want a fee for his time and efforts and it’s up to you “The Investor” to qualify him. Here’s some questions to ask yourself and your potential manager.

Here’s a given.

“Your manager or contractor should have a fluent background of investment properties and a passion to provide the community with a quality home that increases the end buyers standard of living.”

“Your manager or contractor should have a residential builders license in the state you are operating in.”

This is very important….. Here’s why. PERMITS… This is your investment so playing by the rules provides smooth sailing. When a contractor or manager needs to pull a permit for a Certificate of Occupancy, roof,  general or structural repairs don’t pay extra to for a permit puller. Out sourcing this task can cost you time and money as well as loss of control of your project. Also, your permit puller would now have the right to lien your property. Here’s a quick example: You hire a licensed contractor to do your full rehab. You need a roof and your opening up a wall that requires an install of a structural header. Your contractor pulls a permit for both items and has guys at his disposal to tear off the roof, re-shingle it, and install the header membrane as needed. He then calls in the inspections. Done! Easy as that with no hidden expenses. Or….You hire an un-licensed contractor or manager and while he’s still trying to decide if a permit should be pulled he’s shopping prices and doing the demo. As this is all happening the city drives by and sees your dumpster and puts a stop work order on the window. Good luck finding your licensed contractor now and happy rehabbing.

“Your manager or contractor should have a system in place to cost EVERY SINGLE TASK that needs to be done in a home prior to you closing.”

This is for your protection. You need this data to justify the expectation of repairs and the features your property will offer in comparison to current ARV. Putting together a detailed list of tasks to be completed is the first step to a successful rehab.

“Your manager or contractor should be able to do every task in your project if needed.”

Is he or she is You tubing how to install a window? If so, your in for a treat. Picking colors is one thing and operating production crew is another. Having a full understanding of the whole construction process is a must. The manager should have a full scope of work for the subcontractors. Use FULL DETAILS. This will eliminate corners being cut and will provide the best bang for the buck. Subs should show up to work, not price it out. It costs money and time for the sub to drive to your property, price out your project, and make his own scope of work. Bottom line… your going to pay for that. Your manager should need to do minimal shopping for trades and workers. They should personally know how to do every project themselves. This gives them the qualification to oversee and participate in the project. I know we are all experts because we know an expert but your project manager should be your expert. Remember this is your investment.

“After completing a few hundred full rehabs here’s a tip for you.”

“There is always a corner for a sub or worker to cut that will save him time or money that  may go unseen unless your manager or contractor knows his stuff and is present.”

I could tell you at least 10 things that could be quality installed in front of an investor/contractor/manager using corner cutting techniques that wouldn’t be caught by the un-knowledgable. Don’t be a victim.

Enjoy “Turning Property to Profits”

1. Research the area of the home that you plan to flip. A diamond house in a bad neighborhood is like coal. A high class rental is great for cash flow but not if you want to flip for a profit. You should know your streets in the surrounding area. That’s where your comps are coming from, so don’t grab the cheapest house in a rental market and think you will successfully retail flip it. Look at the school districts, parks, and public amenities. Take the time to look at the bank owned and owner occupied houses that are currently on the market to see what others are asking and what they are offering for the money. Also look at the recent sales and compare to the asking prices and again know what that buyer got for the money. Your goal is to offer the retail buyer the best house in the neighborhood for the best price. Purchase the correct house and create high returns for your private investors and huge profits for you.

2. You need to know your buyers demographics from as many aspects as possible. What are the age groups and income levels in the area. What kind of lifestyles do they live. Knowing what the expectation is before you purchase will give you a good idea if the house you have in mind can meet the highest requirements.

3. Have your contractor by your side to assist you with your rehab budget before your purchase. Your contractor should have strong relationships with every individual who would step foot on your job and should be able to give you accurate price projection from every aspect. You should have a good idea of what materials your going use and what projects your going to and not do. Have a controlled itemized budget before you start any work. Your rehab can make or break the deal.

4. Don’t cut corners on your rehab. If you want to secure your investment capital you have to do the job right. Expect to put materials that are above the standard for the area. Every aspect of your retail flip should be new or refinished. Investors and their contractors tend to leave out the small details to save a buck. Your goal is to flip not hold so pay attention to the minor details. It will pay off.

5. When listing your retail flip hire a broker that works directly in that area so he or she knows that your house is the leader in the community in that price point and will present it that way to the buyers agents. It’s a good idea to hire a broker that understands your position in this deal and the importance of your business. Make sure your broker follows up with buyers agents and produces feedback to you after every showing. Set your expectations high with your listing broker.

6. Have your exit strategy numbers in a spreadsheet so when an offer comes in you’ll know exactly how much you will make based on the offer and all costs to close.

7. After excepting an offer. Take the time to review and research the buyer’s ability to close the deal. Your broker should have this under control but remember your private money is at risk so don’t skip this step. You could lose the deal and waste time.

Creating an overall theme for a home is an interesting experience and can be extremely rewarding if successful and heartbreaking if it isn’t. Many people spend considerable time discussing matters with a designer and others simply have the knack for detailing their spaces already. Either way, the first thing you are going to have to arrange is the financing for your project. If it is on a small scale you may simply be able to pay for it up front. Other then that there are a few equity financing options such as the second mortgage or the home owners line of credit. Both of these options are perfect for renovations as they come with low interest rates with the loan secured by your home equity.

In terms of where to start with your renovations, think about which rooms in the home you use the most. Typically this will be the kitchen, main bathroom, and living room. One of the best ways to change the feel of the first two is to replace all the appliances and fixtures. The living room will be a bit of a different story. This space will be best served by some new furniture, art and maybe new floors.

The exterior of any home can be given new life by some landscaping and TLC for the yard. The yard will be anyone’s first impression of your home so make sure you give it the necessary attention. Tending to the gardens, lawn and driveway will add a nice scenic element to the front yard and add value to the home. Creating your perfect are is not difficult, express your creativity and increase your home’s value at the same time!