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.
Full Answer
How to find the right contractor for a rehab project?
To get the most out of every rehab deal, you need to be on the same page with you contractor. Working with contractors requires that you establish a working rapport and guidelines. Most investor/contractor issues come about by a lack of communication. In a perfect world, you will have an established relationship with your contractor and they ...
How do I start a rehab project on my property?
Mar 16, 2021 · 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 …
What is a rehabilitation contractors insurance policy?
To have the same problem or serious disagreement occur with a general contractor can result in virtually all the work stopping on the project until such time as the issues are resolved. Obviously the dynamics of that occurrence put a great deal of control in the hands of the contractor rather than the investor.
What is a re-rehab property?
The six must-have documents are the independent contractor agreement, the final scope of work, the payment schedule, the insurance indemnification, the W-9 form, and the final lien waiver. Here’s a quick guide to these six must-have rehabbing contracts that will safeguard your interests in the event that a rehab project experiences ...
What is the real estate construction process?
The real estate construction process includes coming up with a solid project plan as well as a detailed scope of work. In addition, one of the most important aspects you should expect to take the lead on is building a strong team.
What is the second area of improvement?
The second area is key improvements that will increase the return on investment (ROI) of the home. This will depend on the type of property and market you’re working in.
Do contractors have copies of their licenses?
In fact, most trustworthy contractors will have copies on hand to offer to potential business partners without having to ask. When checking your contractor’s license, be sure to double-check that it’s still valid and registered in the state in which you’re doing the construction.
What to do if you work with a contractor?
If you commit to working with a contractor, you need to let them work and move out of the way. There is nothing worse for anyone in a rehab deal than being micromanaged. You should spend more time on your due diligence before you agree to work, not after. It is your project and your money.
What is the relationship between investor and contractor?
On every rehab deal, the relationship between investor and contractor is a critical one. If the level of communication is poor, you can expect numerous issues to arise. Conversely, if you work harmoniously with your contractor, you will have a much more pleasant and profitable experience. Just like working with other people on your team, ...
How to get the most out of rehab?
To get the most out of every rehab deal, you need to be on the same page with you contractor. Working with contractors requires that you establish a working rapport and guidelines. Most investor/contractor issues come about by a lack of communication. In a perfect world, you will have an established relationship with your contractor ...
When working with a contractor, do you need to pay upfront?
When working with a contractor, you need to pay the right amount upfront without leaving you susceptible to getting ripped off. Before the first nail is hammered in, you should both have a schedule of when funds will be dispersed and what work will be done.
Do contractors lowball estimates?
If your contractor gives you an estimate for their work, labor and materials, they should be willing to stand by it. Many contractors will lowball their estimates in the hopes of getting their foot in the door, knowing that these numbers can never be met.
Can a contractor work fast?
Speed of work is always important, but any contractor can work fast if they don’t have no regard for how they are doing it. Most contractors will have a website they can refer you to, s to see previous projects or a few references. Never move forward with any contractor until you see the quality of their work.
What should a contractor's answers be?
While a contractor’s answers should align with your particular strategy and criteria, it is important to remember that they have a decision of their own to make. You need to equally portray yourself as a viable business partner. You need to address items that motivate the contractor and provide them with a reason to choose you over anyone else who may desire their services.
What questions should I ask a contractor?
During your pre-screening interview, there are certain questions that need to be accounted for. In fact, most contractors will not only be willing to answer questions, but also be expecting them. Knowing the answers to the following questions will make your decision much easier: 1 How many years of experience do they have? 2 Do they own the proper tools and equipment? 3 How many workers are on their team and how many jobs do they currently have under contract? 4 Are they licensed and permitted? 5 Do they have liability insurance and provide workers compensation insurance? 6 Do they enlist the help of subcontractors? 7 Have they ever declared bankruptcy? 8 Are they willing to provide referrals from previous clients and jobs?
What are the factors that determine the success of a rehab?
The success of a rehab is generally dependent upon two factors: having a proven system in place and finding a good contractor that is comfortable working within the confines of said system.
How many years of experience do you need to be a contractor?
A good contractor will answer the previous questions with something resembling the following: Experience: You want to look for at least three to five years of experience. Equipment: The contractor you hire should already have their own equipment (don’t depend on rentals).
What is the role of a real estate agent?
Real estate agents find homes, investors secure deals and accountants manage funds. Everyone has his or her place amidst the frenzy of a rehab. More often than not, every position needs to be addressed prior to initiating a deal. However, some roles are more important than others.
Is the contractor the second most important person in a rehab deal?
Beyond investors, the importance of subsequent roles can be debated. However, one can ar gue that the contractor is the second most important person in any deal. Just like an investor, the profitability of any rehab is directly correlated to the contractor.
Is it important to hire a contractor for rehab?
Therefore, hiring a dependable contractor is not only critical, but also essential to the success of a rehab. Locating and hiring the right contractor for your rehab may be less daunting than originally anticipated. Accordingly, with the right system, hiring a good contractor is rather easy. The following will serve as a guide in your pursuit ...
Investors may hire contractors (and spend more)
Investors may choose to hire others to do this real estate rehab work. These “others” include general contractors, perhaps individual tradesmen, and in the end they will often rely on rental or sales agents as well, to advance their program.
Or you could buy better properties..
If the investor is uncomfortable working with general contractors, or perhaps feels unprepared to do so, then an alternative is to simply concentrate on buying superior properties.
Experienced investors will get involved directly
Investor/rehabbers assume a more active role. They tend to personally select the tradesmen involved and detail very closely the work to be done.
Remember: Only YOU care that the job gets done
Regardless of who tells you what they think, a typical real estate rehab should probably take no more than three to five weeks to complete. Elsewhere I make the case for completing a typical single family rehab in 21 days or less.
What is the best way to make sure a rehabbing project goes smoothly?
1. Independent Contractor Agreement. This is the main binding agreement that establishes the ground rules of the proposed relationship between you and the contractor. It is one of the most important things you can do to make sure a rehabbing project goes smoothly, as it outlines the major roles and responsibilities for each party in the transaction.
What is scope of work in real estate?
Creating a scope of work for real estate requires precise language, no ambiguity to your wording, and the specific deliverables, schedule, technological needs, overview, and materials required to see a project completion. Though there are some fine contractor scope of work templates out there, it’s vital that, whatever you use to build your scope ...
What is rehabbing investment property?
Rehabbing investment property is often romanticized. Buying a broken down property, investing time and money into it, flipping the property as an improved and beautiful home, and walking away with a handsome profit is one of the most glamorous dreams of many would-be real estate investors.
What kind of insurance do contractors need?
Furthermore, you’ll want procedures in place to ensure that contractors have up to date licenses and insurance. Types of insurance you might carry may include fire, theft, and flood insurance for investment property, landlord liability insurance, and health insurance for employees.
Can contingent plans go wrong?
No matter how well you plan, and how well you account for every possible obstacle, things will go wrong. Even with contingent plans in place, you’ll still have to make changes on the fly. So expect to solve unexpected problems on a moments notice, and develop the knowledge to make snap decisions that will keep the rehab moving forward.
Is insurance necessary for rehab?
When rehabbing investment property you want to ensure that you’re adequately insured , so you’ll probably want to consult your attorney to make sure all your bases are covered.
Do you need to fix a physical dwelling?
Besides the ability to fix the physical dwelling, there are legal requirements that must be met, and unforeseen challenges that must be overcome. If you want to sleep better at night, have a happier life, and make more money, do what successful real estate investment companies do, use professionals to do the rehab.
Is real estate a business?
Remember, real estate investing is a business. Investment properties that you buy and sell are not your home. Every property you buy to rehab needs to turn a profit, and every decision you make about rehabbing the property needs to be about profit margins. If you don’t think this way, you won’t see a reasonable return on your investment, ...
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Understand your buyer and the neighborhood
Before you start calculating rehab costs, understand what the final product will look like. Some high-end remodels take months—cosmetic renovations take just days.
Tour the property thoroughly
Next, with a good understanding of how you want the finished product to look, walk through the property very slowly. Take a lot of photos or record a video on your phone so you can easily recall the condition later. Trust me, you won’t remember it all!
Write down the problems
While you are still on-site at the property, go room by room and write down its condition, as well as any needed repairs. For example, if you walk into the living room and see carpet that looks and smells like dog urine, write down “replace carpet in living room.” Also, jot down a quick estimate regarding the size of the room.
Condense your list into 25 categories
Next, take your comprehensive list of repairs and classify each one into one of the following 25 categories, which encompass all of investment property renovation. For example, if the living room and bedrooms need carpet and the kitchen needs vinyl, group all of them together and include them under “flooring.”
Determine a rehab price for each category
Once you have your 25 categories spelled out, it’s time for the most difficult part: estimating the rehab amount for each category. However, breaking everything down into the basic components of a renovation makes estimating rehab costs much easier.
When in doubt, ask for help
Don’t be afraid to ask for help. You can do this in a few different ways:
Building Your Team
Creating A Plan of Attack
- Before a single nail is hammered, or the drop cloths are laid down to do that new paint job, it’s vital that you walk through a rehab property that you’ve purchased and come up with a plan for how you’ll approach the rehab. This plan will often cover two key areas. The first is repairs that are required to bring a property up to standard. This is when you do a walk-through of a property wit…
Create A Scope of Work
- This is a much-more granular plan of attack than simple big-picture strategy. This is a deep dive look at exactly everything that needs to be done on a project, when it will be done, and how much it will cost. Sometimes this will be done with a contractor you’ve worked with in the past. Other times, this will be done first, and then you send this out for bids from various contractors. Either …
Roll Up Your Sleeves
- Once you’ve got your scope of work, it’s time to let your contractor and your team to go to work. As “captain” of this rehab construction ship, it’s good to know the different phases a particular rehab will go through. They are demolition (trash clean up), foundation and framing, electrical/HVAC and plumbing, insulation, and painting/trim work. Tho...
Inspection & Money
- Once the hammers are put away and the concrete is laid, it’s time to do a final walk-through to make sure that everything on the scope of work was completed. And we do mean everything. Even the most careful of contractors can miss something. (That’s okay; that’s what the walk-through is for.) It’s extremely helpful to utilize a standard but thorough inspection checklist (like …