Rehabbing a House (on a Budget)
Rehabbing a house can be one of the more costly types of investing. Learn the simple steps to rehabbing a house, even if you're on a budget.
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In order to determine if a rehab project will fit in your budget, the first step you should take is to evaluate the property with the help of a professional inspector. An inspector will help identify areas that need to be repaired and will recognize certain problems you might not catch yourself. In most cases, a home inspection will include examining the property’s HVAC system, electrical system, plumbing, foundation, roof, flooring, walls, ceilings, windows, doors and insulation. And pro tip, be sure to take pictures and detailed notes during the walkthrough!
Step two is to create a checklist for your project. The notes you took during the home inspection walkthrough should help with this! Your checklist should include everything that needs to be repaired or upgraded, as well as how much each repair will cost. The goal of the checklist is to showcase your fix and flip project’s full scope of work.
Once you understand how much the entire rehab project should cost, the next step is to develop a budget that works with your finances. Every investor needs to assess how much liquid capital they have access to before committing to any fix and flip deal. And the dollar amount that you’re willing to spend will let you know whether the rehab’s scope of work is too big, or just right, for your budget. From here, you can prioritize projects on your checklist or make changes if necessary.
After finalizing your repairs list, step four is to find a contractor who’s right for you and your project. Not all contractors are made equal, so it is important that investors do their research in order to find a trustworthy and reliable contractor. Be sure to get at least 3 references from past clients, and make sure that your desired timeline is one that your contractor can commit to. Make sure they are licensed and insured to perform the type of work you’re hiring them for by checking their qualifications and certificates. Ask about each potential contractor’s payment schedule to determine if it aligns with how you plan to pay them, and finally, be sure to get a good sense of their work ethic during your conversations!
Once you find the right contractor, it is time to get your permits in order. Proper permits are crucial so that you avoid violating any local building or zoning codes. You can contact your local building department to find out which permits you will need, but in most cases, your contractor should be able to determine this as well.
Now, you’re ready to get to work! Step 6 starts the demo phase of the rehab project. This will include removing all trash from inside and outside of the home, as well as eliminating small damaged items like doors, windows, fixtures, etc. The cleanup phase acts as the prep work for the renovations to come. Ultimately, it will make the actual rehabbing process run smoother.
Step seven begins the exterior improvement phase. More minor exterior improvements made to the house will include the front yard landscaping, driveway, and front door. Bigger exterior renovations include foundation fixes and roofing repairs. These renovations will vary from property to property, but are typically more affordable than interior renovations.
The majority of an investor’s rehab budget will typically be spent on step eight: the interior improvement phase. The most expensive internal components of a fix and flip are normally the HVAC, plumbing and electrical systems. For investors trying to make the most of their budget, there are an unlimited number of ways to enhance the appearance of a home’s interior with DIY projects! Pro tip: upgrades to a home’s kitchen and bathroom typically see the biggest return on investment.
The last step to rehabbing a house on a budget is the inspection phase. This means double checking all of the work that was done during the renovation process. Ensure that every item on your original scope of work checklist has been crossed off and that each completed project meets your standards. Smart investors will also hire a professional to do a final inspection of the house before putting it on the market.
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