What steps would you follow to do a Rehab on a rental property you have just purchase

[Clint Jusino]

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

[Clint Jusino]

Quote from @Alan F.:

Quote from @Clint Jusino:

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

 Texas doesn't have a state general contractors license; plumbers, electricians and HVAC are required to have staye licenses. Subsequently they're required to have bond and liability insurance.

https://www.procore.com/library/texas-contractors-license

TDLR licensing

https://www.tdlr.texas.gov/

Desoto building dept. For permits 

https://desotomo.com/departments/animal-control/

I would suggest you vet any GC very carefully, make sure their plumbers, electrician and HVAC are state licensed.

I'd also suggest permitted work for liability and equity purposes.

The electrical will be dependent on what code cycle of the NEC that Desoto has adopted.

Its doubtful an old HVAC is performing adequately relative to its installation let alone relative to current requirements. The building dept and a licensed HVAC contractor will be able to elaborate. 

Same goes for Electrical as the codes are changed annually.  FWIW "outlets" are either grounded or non grounded receptacles. There's no "prongs" lol.

More than likely smoke alarms will have to be hardwired on a dedicated circuit with an interlocking wire.

When the panel is upgraded a main building ground will be required under article 250 of NEC. That will help for grounding and bonding of the system. GFCI protection will also be required and possibly AFCI dependent upon code cycle.

Make sure the plumber double checks backflow and anti scald codes. Also have him check the DWV (drain waste and vent) so no methane back ups are present. 

Texas is notorious for foundation issues so pay attention to that.  Then any framing and structural. 

Sheetrock and the rest is just eyeliner and mascara.

Remember your building something people sleep in, if you wouldn't live in it then no one else should.

Very best of luck and hope theres many more!

Thanks Alan for a very thorough response! A lot of items you stated I was not aware of. I appreciate that! I'm looking into all of the articles you have shared with me now. I was thinking just like you said "putting lipstick on a pig". :)

[Clint Jusino]

Quote from @Caroline Gerardo:

Quote from @Nicholas L.:

I like @Caroline Gerardo's estimates

a lot will depend on the exact size of the rooms - larger bathroom = higher rehab amount etc.

when i hear people saying a 'rehab' for 20K or even 30K I don't know what they mean

clean-out, paint, carpet, floor and appliances you're looking at 15K right there - you start adding kitchen, bathroom(s), electrical and you go way up

and then there's landscaping, decks, driveways.....

it adds up

 single story 1960's Desoto 1790 square feet is my GUESS, he didn't say... so if larger add zeros

 1500 sq ft.

[Clint Jusino]

Quote from @Nicholas L.:

I like @Caroline Gerardo's estimates

a lot will depend on the exact size of the rooms - larger bathroom = higher rehab amount etc.

when i hear people saying a 'rehab' for 20K or even 30K I don't know what they mean

clean-out, paint, carpet, floor and appliances you're looking at 15K right there - you start adding kitchen, bathroom(s), electrical and you go way up

and then there's landscaping, decks, driveways.....

it adds up

Thanks Nick for your expertise. We will see how much I have to pay when i get all of the bids next week. its a 1500 sq ft home. the goal is to rehab kitchen and master bathroom. some flooring in a few rooms with lvp and paint, appliances, lighting fixtures. It all adds up I could only imagine.

[Alan F.]

Quote from @Clint Jusino:

Quote from @Alan F.:

Quote from @Clint Jusino:

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

 Texas doesn't have a state general contractors license; plumbers, electricians and HVAC are required to have staye licenses. Subsequently they're required to have bond and liability insurance.

https://www.procore.com/library/texas-contractors-license

TDLR licensing

https://www.tdlr.texas.gov/

Desoto building dept. For permits 

https://desotomo.com/departments/animal-control/

I would suggest you vet any GC very carefully, make sure their plumbers, electrician and HVAC are state licensed.

I'd also suggest permitted work for liability and equity purposes.

The electrical will be dependent on what code cycle of the NEC that Desoto has adopted.

Its doubtful an old HVAC is performing adequately relative to its installation let alone relative to current requirements. The building dept and a licensed HVAC contractor will be able to elaborate. 

Same goes for Electrical as the codes are changed annually.  FWIW "outlets" are either grounded or non grounded receptacles. There's no "prongs" lol.

More than likely smoke alarms will have to be hardwired on a dedicated circuit with an interlocking wire.

When the panel is upgraded a main building ground will be required under article 250 of NEC. That will help for grounding and bonding of the system. GFCI protection will also be required and possibly AFCI dependent upon code cycle.

Make sure the plumber double checks backflow and anti scald codes. Also have him check the DWV (drain waste and vent) so no methane back ups are present. 

Texas is notorious for foundation issues so pay attention to that.  Then any framing and structural. 

Sheetrock and the rest is just eyeliner and mascara.

Remember your building something people sleep in, if you wouldn't live in it then no one else should.

Very best of luck and hope theres many more!

Thanks Alan for a very thorough response! A lot of items you stated I was not aware of. I appreciate that! I'm looking into all of the articles you have shared with me now. I was thinking just like you said "putting lipstick on a pig". :)

 Well put, when you provide a quality product you earn respect and credibility. FWIW I've had building inspectors refer customers  ;-)

[Caroline Gerardo]

Note:

Things that have to be fixed like electrical to code, HVAC, drains, foundation (you say the roof was replaced 2018-unknown if true), you have to have a working stove and bathroom do not add any value in an appraisal. The bulk of your cost is labor that is licensed and skilled and not going to come back in rents or a cash out refinance valuation. Since you say it's 1500 feet I'm estimating $71000 of repairs to bring it up to snuff without flooring, painting, making it more appealing or not looking 1960's western. The other rehab is cosmetic and that will have about 50 cents on the dollar valuation to add condition, modernization, curb appeal- actual costs $20000. This assumes the foundation is not cracked or sinking. 

From Gold to White (don't use grey it's outdated)

note I saved one gold chair on the left for 'ole times sake.

Get some lines of credit set up after your loan is approved so you have room to pay everyone. Find honorable, not too over loaded, licensed electrician and plumber. You may need a construction manager (a guy a friend who is organized doesn't need to be a pro trades person but doesn't use or party) to daily boots on site be orchestrating who is on first and that no one steals your supplies. Keep a room inhabitable for him/her to stay. Find a way to have the wifi operating so that person can report daily and a security camera works. Have the camera go to your phone. Keep notes so you learn from each day. There are apps but a spiral paper notebook is fine. Consider this a graduate level masters class with your money. 

[Bruce Woodruff]

Quote from @Caroline Gerardo:

2.Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

$9500

Caroline is always right :-) But I would say that the electrical bid is going to be low. Panel will be $3000+ all by itself, and running a ground to every single switch and outlet in the house will be a mess....they may have to literally demo drywall below every electrical box..... been there/done that and it ends up being a complete re-wire most times......

[Caroline Gerardo]

@Bruce Woodruff yes it could be aluminum or knob and tube for all we know. Probably too many outlets on a circuit and a lack of proper grounding on everything. 

I suggested to Clint to stack some credit cards to have zero rate for 12 -18 months as his cushion for cash. Stacking is high risk and does lower your FICO by 8 points so do it AFTER the mortgage funds, on that morning do four. There are stacking companies on BP who charge an arm and leg for this. I get no affiliate marketing, charge nothing, and guarantee nothing. Here is how: 
https://cgbarbeau.blogspot.com/2024/01/credit-card-stacking....

[Alan F.]

Quote from @Bruce Woodruff:

Quote from @Caroline Gerardo:

2.Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

$9500

Caroline is always right :-) But I would say that the electrical bid is going to be low. Panel will be $3000+ all by itself, and running a ground to every single switch and outlet in the house will be a mess....they may have to literally demo drywall below every electrical box..... been there/done that and it ends up being a complete re-wire most times......

 Hopefully OP is still reading; Bruce & Caroline make great points! So pay attention. Having a bathroom & sleeping/eating while flipping is pure gold lol. It's not sexy or TV worthy but when I started I had to suck it up! LOL

[Terrence Guthridge]

Now that you know what you want to do with your property the First thing you should do is go to Home Depot, Lowe’s etc to scout contractors. Any body you see buying a lot of flooring material introduce your self in ask if they have a business card. You see a group buying a lot of 2 by 4 and drywall introduce your self in ask if they do demo work etc. ask them to show you pictures of there work. If some contractors don’t speak English use google translator. It’s free to have contractors come give you a quote so get as many as you can. Be patient in you’ll meet your budget. Keep grinding, good luck!!

[Tad Sillman]

@Clint Jusino

Are all the drain lines cast iron and the supply lines steel? That will add up quick if the drain lines fail. Your issue, normally, isn’t with the vertical runs of pipe. It’s the horizontal runs that get you. Also electric updating, at least in the upper Midwest, will eat up quite a bit of money if they end up having to rerun everything. I apologize if this has already been addressed.

[Clint Jusino]

Quote from @Caroline Gerardo:

Note:

Things that have to be fixed like electrical to code, HVAC, drains, foundation (you say the roof was replaced 2018-unknown if true), you have to have a working stove and bathroom do not add any value in an appraisal. The bulk of your cost is labor that is licensed and skilled and not going to come back in rents or a cash out refinance valuation. Since you say it's 1500 feet I'm estimating $71000 of repairs to bring it up to snuff without flooring, painting, making it more appealing or not looking 1960's western. The other rehab is cosmetic and that will have about 50 cents on the dollar valuation to add condition, modernization, curb appeal- actual costs $20000. This assumes the foundation is not cracked or sinking. 

From Gold to White (don't use grey it's outdated)

note I saved one gold chair on the left for 'ole times sake.

Get some lines of credit set up after your loan is approved so you have room to pay everyone. Find honorable, not too over loaded, licensed electrician and plumber. You may need a construction manager (a guy a friend who is organized doesn't need to be a pro trades person but doesn't use or party) to daily boots on site be orchestrating who is on first and that no one steals your supplies. Keep a room inhabitable for him/her to stay. Find a way to have the wifi operating so that person can report daily and a security camera works. Have the camera go to your phone. Keep notes so you learn from each day. There are apps but a spiral paper notebook is fine. Consider this a graduate level masters class with your money. 

 Wow i love your rehab before and after! thanks for your thoughts and feedback. I'll def be taking notes and will be on-site to learn and make sure they are working during the day. I like the security cameras idea as well. Great ideas!

[Clint Jusino]

Quote from @Tad Sillman:

@Clint Jusino

Are all the drain lines cast iron and the supply lines steel? That will add up quick if the drain lines fail. Your issue, normally, isn’t with the vertical runs of pipe. It’s the horizontal runs that get you. Also electric updating, at least in the upper Midwest, will eat up quite a bit of money if they end up having to rerun everything. I apologize if this has already been addressed.

 theres is half pipe thats cast iron that drains to the outside. its half cast iron and half pvc. i was told i can get it relined which i plan to do. Thats all I was told atm. I appreciate your help!

[Bruce Woodruff]

Quote from @Terrence Guthridge:

If some contractors don’t speak English use google translator. 

Another man's take would be this: If Contractors don't speak English, run like h*ll. a) they're probably not legal residents, and b) do you really want to  use a translator for every job related discussion? No you don't, this is difficult enough anyways....

[Terrence Guthridge]

Never even crossed my mind they could be illegal immigrates. I was more so giving a few suggestions on how to build a network of contractors and not letting language, race etc limit your search. Maybe I’m just naive for thinking a licensed contractor in my state who’s able to pull permits is here legally. Il ask for more credentials next time. Thank you for making me aware. 

[Jacob Sherman]

are you planning on gc'ing it yourself or going to hire a contractor ? 

[Pat L.]

As mentioned above your cost estimates are very, very conservative.

2018, we finished a 1950's era 1300 sqft Cape. Complete gut job, all new electrical, upgraded service to 150amps, all new plumbing, new HVAC, windows, doors etc etc. We went back to the studs on all lower floor walls/ceilings. Built a new master bath, added a 2nd 1/2 bath upstairs, all new kitchen with granite etc etc, plus removed a 13ft wall between the kitchen & Living Rm.

Cost of wife & I doing it ALL $65k, just for materials, permits, inspections. (I was 'permitted' to do all the work myself).

Sold it with 50% down & we hold the note for the balance @ 5.75%. Made a very nice profit complete with the added RE note annuity.

[Tony Pellettieri]

I would recommend reading/listening to a few books on the topic. They lay out and explain the process.

1: The Book on Flipping Houses - J Scott

2: FLIP - Rick Villani

3: BRRRR - David M Green

4: The Book on Estimating Rehab Costs

Well worth the time and very informational.

Good Luck!

[Matthew Paul]

Quote from @Terrence Guthridge:

Now that you know what you want to do with your property the First thing you should do is go to Home Depot, Lowe’s etc to scout contractors. Any body you see buying a lot of flooring material introduce your self in ask if they have a business card. You see a group buying a lot of 2 by 4 and drywall introduce your self in ask if they do demo work etc. ask them to show you pictures of there work. If some contractors don’t speak English use google translator. It’s free to have contractors come give you a quote so get as many as you can. Be patient in you’ll meet your budget. Keep grinding, good luck!!

 This is bad advice .  Contractors dont pick up lots of 2 by 4s at Home Depot , those get delivered . The guys at Home Depot are the employees . All you will get are guys doing side work . 

When you go cheap , you get cheap .     

Hire a licensed  Contracting Company  .     

[Shawn Parsh]

Clint,

I see you have received a lot of input that you are probably still trying to think through. Here are some of my thoughts. I like to figure my estimated cost before I make an offer on the property. If needed I get my team to come to the property to give estimates Before the purchase.

There are several important aspects to house flipping as I'm sure you are well aware. For starters the cost for the rehab and the expected sales price after the rehab. Another is the timeline for getting everything done. When I close on a house I try to have my team ready to start the work the same day I close. I know a lot of investors wait until they buy the property and then start getting estimates and work scheduled. For me that waste too much time.

For the rehab I would not pay skilled labor prices for unskilled work. I personally do not use a general contractor I call the people I need directly. Having said that I have been investing and rehabbing properties for over 25 years so I feel pretty confident on what needs to be done and I know how it should be done. Only you know your knowledge level. What I will say is I would not pay skilled labor prices to have cabinets and bathrooms tore out for example. I also believe a good handyman is more then capable of installing cabinets and other general tasks. You may not have a lot of rehab experience, but I'm sure you can see if cabinets are level and feel solid. 

As far as cost, I would get written estimates for the work that needs to be done...preferably before you make the offer, but definitely before you buy. Then you won't have to guess on the costs. Your friend that is selling the property might very well be able to complete the rehab for the price quoted, but do you have the same crew/team? Start and continue to build a team that can provide input on their area of expertise. 

I know costs are different all over, but I am finishing a rehab this week that will end up at about 37,000. It is a 1270 square foot house with 2beds/1 bath. My team tore out all the kitchen cabinets, removed the stand up shower, toilet, and vanity, added a laundry closet, knocked out a wall to add a full shower, built a large deck, installed all new flooring, replaced all but one light, had the electric updated and a couple outlets added, repaired two broken windows, replaced some of the plumbing, painted the exterior of the house and all interior rooms, put in all new kitchen cabinets with quartz counter top, all new appliances to include washer dryer and dishwasher, installed a new tub, vanity, toilet, built a stone base to the fireplace, and did some landscaping. There are a few other things we did as well, but you get the idea. 

I would suggest you keep track of what you are spending for each step in the project and determine where you can save money and get the same results. You will learn on every project and will get more efficient. Good luck. 

[John McDonald]

Make sure to follow up with the costs after you get your GC with the final bid. Let us know how it worked out.

[Randall E Collins]

Quote from @Clint Jusino:

Quote from @Tad Sillman:

@Clint Jusino

Are all the drain lines cast iron and the supply lines steel? That will add up quick if the drain lines fail. Your issue, normally, isn’t with the vertical runs of pipe. It’s the horizontal runs that get you. Also electric updating, at least in the upper Midwest, will eat up quite a bit of money if they end up having to rerun everything. I apologize if this has already been addressed.

 theres is half pipe thats cast iron that drains to the outside. its half cast iron and half pvc. i was told i can get it relined which i plan to do. Thats all I was told atm. I appreciate your help!

[Randall E Collins]

Hey Clint. Did you have the chance to look over the properties I sent you? I did send some right? my memory isn't what it used to be. 

[Scott Mac]

Put some time money and thought into curb appeal.

You can do all the interior stuff you want, but if the curb appeal is poor, your results to attract quality renters will probably also be poor.

Good Luck