The Renovation Process Part 3
Find, Buy, Sell Series Part 2
In my Find, Buy, Sell Series I will be taking you through the four categories of real estate investing. Part 1: How to find properties. Part2: How to evaluate the properties Part 3:The renovation process and Part 4: Sale and closing.
The Renovation Process: Part 3
We found the property, we estimated the repairs, and we made an offer we got the offer accepted and closed and now it’s time to renovate the home. Hopefully by this time you have done your due diligence and selected a top contractor to work on the renovation for you. If you have not let’s take a step back
Not all contractors a created equal. Investors generally have two different models when it comes to renovating a home. One model is to hire a contractor for each trade in the renovation. So one contractor who will do the electrical, one for mechanical, one for plumbing, a handyman and so on. In this scenario, the investor becomes the “Projector Manager” and is coordinating the entire renovation and all trades. The second way to do it is to hire one general contractor who will manage the entire renovation and hire his own sub-contractors to perform the various parts of the renovation. Either way is fine and it really comes down to how much time you have, If you are working on a property here and there scenario one may be best for you, if you are working on 50-100+ renovations a year there will be no way you can manage the renovations yourself.
In either scenario make sure you spend time interviewing the different contractors and verifying their level of craftsmanship, skill and expertise. A bad contractor can destroy your renovation and cost you twice as much money to hire someone to fix the mess. You will have to make sure your contractors are licensed and insured and come with good references.
It is easy to fall into the trap of wanting to hire the cheapest contractor on the block after all this puts more money in your pocket when you resell the home right? That is the wrong way to think, I can tell you without a doubt DO NOT HIRE THE CHEAPEST CONTRACTOR ON THE BLOCK!, these contractors will cost you more money than you can ever imagine, a good contractor may cost more but will ultimately put more in your pocket with providing you a quality product that sells fast and comes with no lingering issues.
Bad contractors can cost you time and a lot of money
· *Over budget
· *Over schedule
· * Poor quality and craftsmanship
· *May get into arguments with you and walk off the job, put liens on your property, etc.
· * Steal or embezzle money from you
· *You may have to re-renovate their renovation!
· *Create liability for you down the road when you resell the home
· *You may have to fire them during the job and hire someone new costing a lot more than you originally planned
A good contractor will save you time and money
· * Comes in on or under budget
· *Comes in on or under schedule
· *Pulls all the proper permits
· * Is licensed and insured
· * Ensures a great quality end project the new owner can enjoy for many years to come without issues
· *Will look for ways to save you money without affecting quality
When renovating a home keep in mind some key pointers
· *Going over schedule can cost you a lot of money in carrying costs, utilities, insurance, if you have a loan on the property. Keep a close eye on this. Consider enforcing a late fee to your contractors for every day the project goes over schedule.
· *Make sure you have your contractors sign independent contractor agreements also a DETAILED! Scope of work. Consult an attorney to make sure you have an iron-clad agreement to protect you and your business
· *Require your contractors to be licensed and insured
· * Consider having your contractors take out a bond for the project
· *Consider using checklist to make sure you have a consistent end project during, before and after renovation
· *Hire slow, fire fast!
· * Call around when shopping trades don’t choose the cheapest don’t choose the highest look for middle grade. You will be surprised at the vast differences in pricing.
· *On average, a renovation should take 1 week for every $10,000 spent. If you have a $30,000 renovation, it should take three weeks. Time is money and opportunity in this business.
As always feel free to reach out to us for questions or comments or if we can expand on any topic. Go out lock down some properties and happy investing! Visit us on the web at www.TheBorlandGroupllc.com