In this field, enter the estimated rehab cost.
Top Rehab Tips
- Get at least three contractor bids. Many lenders will require 5, so be prepared to spend some time getting legitimate bids.
- If the bids are close and no major differences in scope of work you choose your contractor based on their track record of sticking to a budget and timeline.
- If the bids are not close, there is a problem. Ask each contractor about the other bids. It’s an easy way for you to find out the issues. And don’t worry about telling contractors you have other bids, contractors with experience will assume it.
- Don’t forget about the “creep,” it’s standard to add 10% to bids for change orders.
How to estimate
There are a lot of ways you can go about estimating. Take your contractors on a walk through. Some take square footage times a budget such as $10/ft or $30/ft, depending on how much rehab is needed. Is it cosmetic, is it more intense. Does it require structural changes, adding a room, plumbing, electrical, roof. Some will walk through with a checklist, and add room by room what they think is needed.
All of this depends on the phase you are in. If you are just browsing online, you probably will do a square footage approach. When you visit you might want to bring a contractor, or take thorough pictures for a contractor to give you a non-official verbal bid. When you are under contract you want to get the full scope bid by at least three contractors.
Do it Yourself vs Using a Contractor
Are you looking at flipping as a hobby or a serious money maker? If you are more serious, pick what you want to be. Do you want to be an investor or do you want to hammer away in a house while you could be finding other deals? Is it worth the 10-20% savings to do it yourself?
Realize that many cities require permits and inspections, for example if you open a wall, touch plumbing or electrical, or structural changes. Flippers find out when they try to sell the home and the buyer’s inspector finds rehab that wasn’t done up to code. Or the improvements cannot be used to increase the value of the home because permits and/or inspections were not done properly. Remember these often need to be done while the rehab is ongoing, not afterwards.
Inspection
Don’t let a seller hurry you. You need to get time to inspect or your risk goes up to unacceptable levels. It is a competent seller’s skill to get a sale closed as quick as possible, it is yours to take the time you need not to make a mistake. Sellers will expect what is standard, and standard is two max three weeks for inspection and a month to six weeks to closing.
Before you close on the property get an inspection, so whatever the inspection indicates is covered in the scope of work and is covered and addressed when you go to sell the property. You don’t want the buyer’s inspection to find things you didn’t address.
Need more information? Everything can be obtained by searching online. This site is not specific to a particular way of flipping, it is common “industry” standards and practices only. But you are welcome to contact us – we are a members-only flipping and funding company.
Keystone Funding Network