Lowering rehab costs

[Robert Greathouse]

I am on this site to get as much info as possible before I even look for my first investment. I would like to use flipping as a way to make enough money to eventually purchase a mid sized apartment complex. I have found a HML that will finance the purchase and rehab of a flip property. They will escrow the rehab money and release it upon completion of phases of rehab. I am a very skilled carpenter and can do a lot of the work in most cases, such as demolition, some drywall repairs, paint, hanging cabinets, tile, etc. My question is.. If I get a quote from a contractor for a rehab cost of say $15,000, and looking at the itemized quote I see at least $5,000 worth of work I can do myself. Would I be able to get the HML to pay me for the work instead of the contractor? Should I do the work and maybe impress the HML that I saved 1/3 of rehab costs, thus inprove his view of my abilities for future deals? Any info would be helpful.

[J Scott]

Originally posted by Robert Greathouse:

\To me it is well worth it to make and extra $5-10,000 on a rehab by doing some work myself.

Here's the problem with this...

Let's say you plan to save $7500 by doing work yourself (this is in-between your $5K and $10K number). And let's say that your skills equal a decent unlicensed contractor who would typically earn $20/hour.

In order for you to save $7500, you'll have to put in 375 hours of your own time ($20/hour * 375 hours = $7500).

That means if you spend full-time on the project (40 hours/week), you'll spend nearly 10 weeks on the project just completing your portion of the work!

Does it really make sense to spend 10 weeks doing $7500 worth of rehab? On one of my jobs, that amount of rehab should generally take a couple days at the most, and by spending 10 weeks, you're running up your loan costs, your holding costs, your resale risk, etc.

From my perspective it just doesn't make sense. Pay someone else to do the work, and spend those 10 weeks finding another deal that will make you $15K more in profit...this way, you net an $7500 *AND* you don't have to lift a hammer...