Fixin’ to do a Rehab by Jerry Fink
Jerry Fink has been involved in various aspects of real estate for over 30 years. In the early 2000’s, after being caught in another corporate downsizing, he went into real estate full time. He’s my go-to for all things rehab, because his background as a CPA makes him very process-driven. He leads to all-day property tours at my Hands-On Wholesaling Academy, which is coming up again August 22-25
O.K., so you have gotten it into your blood, mind and soul that you want to be a Rehabber. Take that ugly, smelly eyesore and turn it into the gem of the neighborhood. No problem, right? After all, you’ve watched all the shows on TLC and HGTV. You know all about what countertops to choose…what color schemes will wow your buyers…and, that bathroom layout you have etched into your mind is killer….
Well, there may be just a bit more to it than you think.
In this article, I want to address some of the areas you will want to start with before ever lifting a hammer or paint brush. Some of the things which, if done correctly ahead of time, will make your project run infinitely smoother, save you time and money, and allow you to keep any hair you currently have.
What Needs to be Done?
Believe it or not, this is one of the areas where most of us…even experienced Rehabbers…have some of our biggest challenges. Do I replace the windows? What about the furnace? Should I use Home Depot countertops…Corian…mid-range? There are a myriad of things to consider here, and the more experienced and wise you become, the closer you will be to “guessing right”.
For instance, one of the first things you must consider is: Who is my end buyer / user – are you rehabbing for a landlord or for a retail buyer? Vinyl flooring in a rental unit is just fine, but a retail buyer will really be impressed by ceramic tile in the kitchen and bath, and *may* be worth the extra cost.
So, once you have thought through who you are rehabbing for, and what “level” of rehab you are doing, you need to put together your “Scope of Work”. In my business I have 2 levels of these; one for “Light Rehabs” (under $10K of work), and one for “Full Rehabs” where I am gutting a property, or getting into replacing complete systems. For this article, I will be primarily discussing the Light Rehab Scope of Work.
How will you do this? Do you think you will remember what needed to be done once you get home? Not likely. You could jot down some notes on a yellow pad, which would be better. How about using a program that prompts you through all the common things which need to be done to a house? Now we’re talking…
Over the years I have developed a program for doing just that. It has line items for each component in each room. I simply notate whether I am going to replace the duplex outlets or just the cover plates? Is a new kitchen faucet in order? What color should the living room be painted?
What Materials Will you Need and Where Will you Buy Them?
After you have decided what needs to be done, you will need to figure out what materials are required, right? If you decided to change out the duplex outlets in each room, you need to add up how many and what color. You need to calculate the number of single plate covers, and the number of double plate covers. How much of that “oops” purple paint will you need to do that second bedroom? And, how many trips to how many carpet outlets to find a suitable carpet at a price you are willing to pay?
I have to admit, early on I spent waaaayyyy too much time carpet shopping, and bargain shopping for this and that. Finally, it occurred to me that MY TIME is worth more than that. So, I went on a quest to find materials, and color schemes, and fixtures which work…and did the shopping just one time.
And, you may do just that. Off you go. Hours and hours at Home Depot and Lowes, the carpet outlets, the appliance store, the cabinet stores….and eventually you have come up with your list of appropriate materials. So, now you simply marry your scope of work, to the materials needed, to the appropriate materials list, and the supplier list and you’ve got it made. Well, pretty close to true. You still have those pesky “sundries” items to consider: Do we have any paint rollers left? What about painters’ tape? Did we use the last of the drywall compound (for patching)? If you and your contractors are going to be efficient, all those things need to be available, too.
How about one better? What tools will I (or my contractors) need to do what needs to be done? Over time, I’ve even created a tools checklist, so I don’t have to hear my contractors sing “can’t do this today, because I forgot my whatchamagigger”. Again, time saved, and productivity increased.
Who Will Do What, and When?
Ok. So, you have decided what needs to be done. What materials you or your contractors will need to do what needs to be done. And, where you will buy those materials. One main step to go before that first hammer is lifted.
If you have dabbled in construction, rehab, repairs, mechanics, etc. most of your life…your first inclination will be to do all the work yourself in the evenings and on weekends, and save all that labor cost. Yeah, you can do that, and maybe do one or two rehabs a year. That is fine if it is your hobby. But one of the truisms of this business is that time is money. Your single biggest enemy is not the cost of doing the rehab, but the cost of carrying that house. Interest costs. Gas and electric bills. Taxes. Insurance. They will eat you alive.
However, if you are disciplined enough to get your scope of work completed, and organized enough to have your materials ordered and delivered, be smart enough to hire people to do the things that they do day in and day out. I can hang and finish drywall, but the pros can have a house finished before I am through with one room.
I recently saw one of the Extreme Home Makeover shows where they built a 7 bedroom, 4,500 square foot home in under 55 hours elapsed time. My head was spinning thinking about the logistics of pulling that off. While we won’t be doing anything quite like that, the concepts are still valid – creating a coordinated workplan which will allow the right people, with the right skill sets, to have the right materials and supplies available and do their part in the overall project. You can plan this on a napkin, or you can do it in an industrial strength program they may use to build a new stadium. For the level of rehabs we do, a simple one-page overview chart works just fine.
Rehabbing a house can be an extremely satisfying experience. To this day, I absolutely love going into a neglected or abused house and visualizing the end product. I see the fresh paint and the new carpet. I see the neatly cut-in landscaping beds. I see that welcoming red front door setting off the blue siding and white trim. I see the product that today’s buyers and renters are looking for.
But the best part is this. With the experience I have, and with the systems I have created, I can see all this in my mind…and I can watch it unfold…and I can manage it so much more easily.