Here's the question…Can you “really” do all the rehab work on your project put more money in your pocket? This is a question frequently pondered by new investors…and not so new also…as they look at how they can cut the costs of contractors by simply applying the “do it yourself ” philosophy to rehabbing. It is important to consider the “real” cost of this approach as you consider entering into your rehab project.
Let's be honest. Some of the properties investors consider for rehab usually are advertised as requiring “cosmetic repairs only”. In some cases this may be true…but usually even projects that seem so simple can turn into even more work that you expect.
1. Consider who will do the work on the project before you make an offer. Will you be doing most of the work yourself or will you depend on some volunteer labor, like your family or friends? You will need licensed contractors for HVAC, electrical and plumbing. Be sure to check with your local city office for permit requirements for rehabbing.
You will be doing a complete repair assessment of the property as a part of your due diligence and this will expose the scope of work required to complete the project and have the property ready for sale or as a rental. Use this information to determine what work you consider doing yourself and also how much time it will take to complete.
2. Consider how much time you will have to devote to working on the project. If you are currently working full time or part time, consider how much time you will be able to devote to the project each day. You may find that your evenings and weekends may not provide adequate time to complete the project without resulting in a lengthy rehab. Even trips to pick up materials will diminish the time you can actually devote to working on the project.
3. Consider the value of time. The old saying ” time is money” is very true. My policy is to get in and get out of the project as quickly as possible. The longer the property is unfinished the more expenses increase. Interest on loans, insurance and utilities all eat away at the potential profits. The longer it takes you to get the house completed the less you make.
4. On a rehab project, it can be easy create a ” construction traffic jam” which will result in your project progressing at a “snail's pace”. If your subs are delayed because you have not completed your part of the work, you will find they will be working on other jobs and you may have to get in line and wait until they are available again.
On our rehab projects, I like to coordinate the work so that we can have multiple subs working at the same time. This allows them to move forward quickly and have the project completed by the pre-scheduled completion date.
5. Reputable contractors offer guarantees on their work. This is very important. If you are rehabbing to sell the property, most buyers are wanting to see that the house was rehabbed by an experienced contractor and are expecting quality workmanship.
Rehabbing homes is both exciting and rewarding. The decision to do some of the work yourself must be taken very seriously because it can cost you money.
I have found that creating successful profitable projects are more enjoyable when I place myself in the role of project coordinator. I create the vision for changing the “ugly duckling” into a home where a family will want to live.