What Are The Best 'Non-Shady' Ways To Save Money During A Rehab

Question

For very experienced investors who have done rehabs, either for flips or holds, what are the common things that are done to reduce the rehab budget and save money right off the bat - but without being 'shady' or doing shoddy work?

Thanks

J Scott · Answer

Off the top of my head:

- Instead of hiring a GC, hire a project manager to manage the project for you and then hire sub-contractors.

- Don't try to skip necessary repairs (it will ultimately cost you more)

- Practice your negotiation skills

- Buy your own finish materials

- Stage (will save on holding costs and may get you a higher sale price)

- Hire an inspector to inspect your house before you sell (cheaper to fix things BEFORE the new buyer finds them)

Bill Gulley · Answer

Understand what is required first, don't some floors go before cabinets are set, some not, don't paint before the electrical guy, he should be one of the last ones out, a carpet layer can be the last guy out. Set the work in stages and in order. Hire subs along that time line with plenty of notice.

Organization, have the dumpster in place before you begin tear out, moving piles takes time. Materials on site before your subs are scheduled. All permits in order before you begin work, you don't want some inspector to shut you down then have to wait 2 weeks for his next appointment!

Don't hire the cheapest subs, in the end they are more costly.

Have a good plan, description of work, scope of work as change orders costs more money.

I agree, save the yard, most shrubs can be transplanted and don't overdo it. Landscaping needs to be comparable to the price range.

Comp the competition, you might upgrade a few things for better marketability, if they don't have granite counters and cherry cabinets, you probably don't either, do upgrades that can be seen, but not over the top.

I agree with all J. Scott mentioned, if you lack experience, get an inspection up front so you don't miss something and they can come back when you're done to ensure the buyer will be happy.....home warranties can be worth it in the retail market.

Don't tie up money in materials to just sit there, buying an HVAC unit 3 months before it goes in isn't wise, order it, have the supplier hold it, pick up and pay before installation.

If you have construction financing, limit the draws which will limit the lender's inspections and funding fees. Don't pay anyone without a lien waiver!

If your title work is less than 6 months old, you should get a discount on a new title policy, you might include that in your marketing, might cost you $100, save the buyer $300, set the stage for other seller concessions, but not prepaid items of buyer's taxes, insurance and some lender fees. Put it in the price.

Staging really goes to the price range too, I'd stage a 200 K home, not a 100 K home as the difference in holding costs to the time on the market may not break even, figure your costs, look at the time on the market of comps, look at the staging expense and then decide.

Put up a "Will be for sale soon" sign, or, if it can be shown. "for sale" pick your colors, appliances and fixtures! Getting a buyer under contract as a contract rehab will save you money as they can buy and pay for what they want and your marketing time/holding period is not so much of an issue, it's a load off your chest! Good luck :)

Aaron C. · Answer

I always try and do the demolition work myself and prepare the house like a blank canvas. Getting all the trash out always helps me think more clearly. Just be sure you don't go knocking out walls that are supporting the house!

Matthew Paul · Answer

Pick up some tools and do what you can.  Then learn to do what you cant .

J Scott · Answer

It really depends on your scale.  I pay my project managers a combination of salary and commission (a piece of all profits), so the more projects I do -- and the more successful they are -- the more money the project manager makes.

In a typical year, I might spend $500K-$1M in labor costs.  If I were paying a General Contractor 15% of that to manage things, that's $75-150K in GC costs.  My project managers make on the low end of that range, so potentially I'm saving some money there.  But, more importantly, because my PMs have an incentive to get things done on schedule and on budget (they get a piece of the profits), I typically make larger profits than if I were using a GC who was financially incentivized to add to the scope of work (not that they would, but they have a financial incentive to do so).

Richard C. · Answer

Save the lawn, if you possibly can.  Usually all it takes is care.  Way too many contractors on a major rehab just assume any part of the landscape can be destroyed.

Rodney Marcantel · Answer

Most expensive areas are kitchens and bathrooms. So in the kitchen, restore or resurface cabinets. You can replace doors on cabinets far cheaper than new cabinets. $70 for doors (any size) and $45 for drawers (any size) at kitchenreface.com. You can also use Corian counters instead of granite but depending on the price point you're selling at, you may need granite. If so, go with a lower quality granite or pre-fabbed granite if your space can accept that.

In the bathrooms, if tile is standard and in good shape, you can glaze the tile. Same for the tubs. Glazing is far less expensive than replacing tile and tubs.

You can go with laminate instead of glue or nail down hardwoods. However, get higher quality laminate that is thicker than cheap laminate. It will last longer and look/sound better.

Salvage as much of the yard as you can and replace only what is necessary. Shouldn't compromise on curb appeal but you can make some smarter choices and by doing the work yourself, you can save with sweat equity.

Jim Brown · Answer

@Bill Gulley

Awesome Tip!!

J Scott · Answer

Typically, project managers don't need to be licensed, though if they're not, they may not be able to pull permits in some areas.

What Are The Best 'Non-Shady' Ways To Save Money During A Rehab

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