Having flipped close to 100 homes, these are the points that have helped us to get jobs done in a timely manner, and make a fair profit.
Rehab Checklist 1-10
If you want to Fix/Flip houses here are10 most important items on the list.
- Line up the subcontractors – After you have the house ready to close, and financing all lined up-now you are ready to rehab! It’s best to have all your sub-contractors or your main contractor meet at the house before you buy the house. You should know the budget and any extra costs that may be upcoming for the rehab. Get all proposals and costs in writing. Also, get a signed contract from your contractor(s) before any work begins. (If you don’t have a contract there are plenty of templates on the internet). This will also help you to know what materials need to be purchased if you are responsible for the supplies. Having a contractor that covers all the costs is easier, and less daunting-especially if you are a new investor. However, be ready to hit the ground running!
- House demolition – If there is moderate to heavy demolition have a dumpster on site the day of closing. Remember time is money! Make sure you have the contractor or crew scheduled to get to work the day of or the day after closing. The demo (demolition) is the first step to getting your project off to a good start. Once completed, you will be able to evaluate additional costs, and come up with a solid game plan for the reconstruction, and final layout of the house.
- Walk the layout – Have a diagram of the room layout and design of the house. This can be a drawing that is done by a CAD based program (you can find them on the internet). A hand drawn diagram is fine also. Walk the house with your contractor or sub-contractors pointing out all the changes and designs on the diagram. This is a good time for the contractor to point out any additional costs or materials that may be needed. Make sure to get any additional labor costs (typically called change orders) in writing from the contractors. After walking the layout, post the diagram in a prominent place in the house for future reference. Time to order the materials.
- Order the materials – The list for ordering the materials should be made when you walk the layout. That way the contractor can help you make sure you order all the materials that are necessary. When ordering materials try to use the same vendor on a regular basis. (Home Depot & Lowe’s are great resources). You can usually get extra deals and discounts for volume business. Being a loyal customer also is invaluable when problems arise. If you have your contractor order for you, this will save you time and effort. WORD OF CAUTION!!! If you allow your contractor to order for you, get copies of invoices to keep them honest. I recommend that you pay the invoices, so that you know the bills are paid. This avoids the possibility of a lien on your house if things go south, and the bills don’t get paid.
- Keep the schedule – Weather you are running the job or your contractor, keep a schedule of all important dates. Every sub-contractor should have a beginning and an end date. This will keep everyone on target. Do not let the contractor set arbitrary start, and completion dates. You mange the schedule! It is your time and money. There will always be delays. Having a schedule will keep things from getting out of hand, and will get your project completed in a timely manner. Most subs and contractors have multiple projects going at the same time. You must be a squeaky wheel to get things done on time!!!
- Mark the Progress – Keep eyes on your rehab project. Visit the house at least 2 times per week or more. Don’t assume that everything is going well. What you expect and what is actually happening may be very different. Visiting the job site on a regular basis will keep things on track. If at all possible, try to meet the contractor at least once each week. This will help keep you up to date on the progress of the job. It will also prevent mistakes from happening. Remember, the contractor cannot read your mind! Lack of communication and no eyes on the project can lead to costly mistakes. Surprise visits also help keep your contractor on task! Time is money, so you must PUSH!
- PUSH, PUSH, PUSH – Time to “get ‘er done!” As your project gets closer to completion, it always seems like there is a little gnome trying to sabotage the rehab completion. There are a few reasons for this. If you pay your contractor on draws, as most investors do, the contractor puts less time on your job and starts working on other jobs that have bigger draws.
Let’s face it, there is very little money at the end of the project to be paid. How do you combat this? Two ways. You could hold back a larger part of the funds to pay until the end of the job. Or, you can do what I do. Since I do multiple flips at a time, I push the contractor to finish the job that’s almost complete.
I do not allow the contractor to work on any other jobs until the one I want done is done. The contractor cannot get draws on new projects until he finishes the old ones. This puts pressure on the contractor. Both ways work. I prefer the second. It works better for me! Being a squeaky wheel, calling and texting on a regular basis, doesn’t hurt either.
- Finishing Touches – I hold back 10% of the final draw from all my contractors and sub-contractors. Why? It’s always in the details. Most craftsman get the majority of the little things done but, there are always those little things they miss that don’t seem important. I call them eye catchers. Trim with over spray, unpainted door frames, sloppy caulking, loose door handles, etc etc. Anything that catches the eye.
I do not release the final 10% until the eye catchers are fixed. That’s why I call it finishing touches. Do not settle for less, you will end up doing them. Especially if you pay before you are satisfied. I hope this goes without saying, have the house landscaped for curb appeal. Big selling point!
- Stage for maximum profit – Staging makes the house look lived in and gives it eye appeal. If you have the time, are creative, and have flair for decorating-go for it! If not, hire a staging company. The house doesn’t need to be fully furnished. It should however, be nicely staged and have a least one decoration in each room. Always concentrate on the kitchen and bathrooms. Those rooms are the focal point for your potential buyers.
Lets face it, you are basically catering to women. While I’m on the subject, have the house professionally cleaned. Also ad plug-ins if the house has a stale smell. (Don’t overdo it.)
- Get it on the market – This is the day you have been waiting for. Putting the “For Sale” sign in the yard. Hopefully, you have a professional realtor on your team. A good realtor is invaluable! Get good reliable comparable’s (comps) of other houses in the area. Price the house at the top of market value. You can always drop the price if showings are minimal. And, the day you have been waiting for–a reasonable offer on your house!
- SOLD!!! If you have followed the golden rule and fixed the house up right-you should be on your way to a profitable closing.