How to Manage an Out-of-State Rehab

Imagine receiving a $20,000 check to purchase a rental property. How about step-by-step guidance from some of the most experienced real estate investors in the industry? Well, that’s exactly what the Dream Investment Adventure series is all about.

Follow along with our contest winner, Joe, and his journey of purchasing an out-of-state rental property. Through the mentorship of Steve Rozenberg, Head of Investor Education for Mynd Property Management, they walk through everything there is to learn about investing remotely. Over the next two months, the pair will research markets, build a team, purchase a property, complete a renovation, lease the property, and everything in between—without Joe ever seeing the property in person.

Dream Investment Adventure Recap

So far, we have learned how to identify investment goals and strategy, determine a rental market, find a local team, analyze real estate deals, and perform due diligence on a property. This week, Steve follows up with Joe and finds he has closed on the property and renovations have begun.

With that, let’s discuss how to find contractors remotely for an investment rehab.

Take Off Your Landlord Hat, Put on Your Management Hat

Investing in rental property remotely forces you to transition from landlord to investor. You learn how to step back from the process and manage a team on the ground. This important skill set allows you to confidently repeat the process over and over with new markets.

How to Find the Right Contractor When Investing Remotely

Finding the right contractor to join your team is the next step of the remote investing project. Managing multiple subcontractors remotely may not be as efficient as looking for a general contractor. Time is money. Having a general contractor simplifies the remote rehab process with one point of contact.

Search the BiggerPockets Forums for contractor recommendations. Utilize the experience of your team, and check with your real estate agent and property manager for their suggestions. They may have people to recommend, as well as companies to avoid. Contractors that specialize in fix and flips may have suggestions that lower your expenses.

How to Pre-Screen Contractors

Keep in mind a recommendation is not a guarantee. Once you have a list of potential contractors, do your own research, too.

Questions to ask contractors during a phone interview:

How long have you been in business?
Do you have a portfolio of past work to view?
Are you licensed, and do you have liability insurance?
Do you have your own crew?
Do you have references?

Check Out Online Reviews

Check out their reviews on Google, Angie’s List, etc. This can confirm they are great or help identify any red flags.

Once you have 3-5 prescreened contractors, solicit itemized bids from each of them.

Put Together a Scope of Work

Provide the contractors with a detailed scope of work for the rehab, so they are all bidding on the same projects. Requesting that the bid be broken up by project will help you do side-by-side comparisons.

Pro Tip: Get multiple rehab bids to ensure accuracy.

Joe received bids from five contractors that included a wide range of numbers. First, he removed the high and low bids. Knowing he wanted a general contractor helped him make his final choice but left him slightly over budget.

In episode 5, Joe calculated his rehab budget variable for this reason. Despite the budget increase, he knows he still meets his cash-on-cash return requirement.

Related: 6 Rules for Managing Your Contractors

Pro Tip: Multiple contractor bids can help build out the scope by getting multiple opinions.

Each contractor is going to view the project differently. Use their recommendations and ideas to solidify your scope of work. Again, this is a point where you want to pull in your team for their expertise. Run your final rehab project list by your real estate agent and property manager to get their opinions.

Are the projects worth the time and money? How will these renovations increase the value of the home and the rent rate?

Joe budgeted $22,000. That estimate was based on managing subcontractors, so factor in a couple of thousand for a general contractor. The decision to create a fourth bedroom in the basement increased the renovation cost to $32,000.

Big-ticket items included:

New siding
New roof
New floors
Creating a 4th bedroom in the basement
Granite countertops in the kitchen
Upgrading the bathroom
Paint throughout the house

Pro Tip: Never assume. Trust your team but verify key milestones.

Joe chose Mynd Construction Management, which is run through Mynd Property Management. The project manager manages the general contractor and keeps Joe updated on the progress. Every few days, Joe receives photos, videos, and a status report.

Pro Tip: Be aware of and prepared for “gotchas” on the budget for an out-of-state rehab.

When you are investing in a market you aren’t familiar with, there can be local rules you aren’t familiar with. Joe had a gotcha moment when he discovered vinyl siding is not an option in the Atlanta area. They consider it a fire hazard, so he had to go with a backup plan.

Pro Tip: Hiccups will happen. Be resilient and have backup solutions.

How to Scale When Investing Remotely

Remote investing teaches you to work on your business, not in your business. You make the decisions, and your team implements them. This process makes it simple to invest in out-of-town properties. This also makes simultaneous investment deals possible, as your team is doing most of the work.

Completing your first remote investing deal will provide the formula for success that you can repeat in any market. There will be nuances in each city that make it a slightly different experience. However, the basic idea is cookie-cutter. And if you decide to repeat again in the same city, you already have your team in place!

Homework Week 6

Find out what is left to do to get the property rent-ready.
Turn the rental property over to Mynd Property Management and get it rented OR come up with a leasing plan.

Wrapping Up

To learn more about Joe’s investing journey, gain access to investor tools and resources, and help your own remote investment journey, check out the exclusive destination page for BiggerPockets fans only.

You’ll also find a limited-time BiggerPockets exclusive offer for property management!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.