Rehabbing property can be a very profitable business for those who do it right, but it’s most certainly not something that you can learn overnight. There are just so many factors at play here, which requires constant micromanagement. One can only truly learn to rehab a property through experience, as this guide on by Broward Real Estate Investors Association (BREIA) illustrates. Nevertheless, you do need to learn the basics first and that’s exactly what we will discuss next; the basics of how to rehab any property.
The Plan
From the outside, it may look like all you need to do is list the essential renovations and hire a contractor to get them done. However, creating a property rehab plan entails much more than just that. Firstly, you need to divide the renovation plans into two parts; repairs and improvements.
The repairs are a priority, of course, and you need to find out about all the necessary repairs, take photos of the place and get the house assessed professionally for vermin infestations, plumbing and electrical issues, faulty HVAC systems, leaks, cracks, rots, etc. Once you are sure you have all the data, get those repairs out of the way as soon as possible. On the other hand, all improvements made should be aimed at increasing the real estate value of the property, without spending a fortune on things. Install a few lights in the garden, get in a light tube to liven up a dark room, install some carpets on the floor, get the garden in shape and do whatever else that you think would make the place look and feel better. While making improvements, do make sure that the price of the property doesn’t shoot up much higher than the neighboring properties because that’s just bad rehabbing investment.
Choose the Right Contractor
What you should be looking for in the ideal contractor are characteristics such as experience, quality equipment, appropriate manpower, and, of course, all the necessary legal documents such as working permits and insurance details. However, in order for a good contractor to work with you, you should be able to instill in the company a trust about the fact that you will call them on your future projects as well. This will help you get a discount and better work. As you go through the bids for the tender, do take all the factors into account and don’t just give the job to the lowest bidder.
Get the Legal Details in Order
It is best that you consult a lawyer before preparing the necessary paperwork, but the following details are always going to be necessary.
- The agreement between your contractor and you that details everything pertaining to the rehabbing project in legal words
- The minimum and the maximum scope of work for the project which also includes all the specifics of the materials that are to be used
- The W-9 Tax Form, which is a necessary IRS requirement for all independent contractors in the US
- The Insurance Indemnification Form protects the project from coming to a halt due to liabilities related to accidents at the workplace
- The final lien waiver
Managing the Rehab
The contractor is supposed to take care of this, but that doesn’t mean you should leave everything up to them. Supervise everything from the demolition, removal of debris, inspections of plumbing, electrical connections and insulation to the last coat of paint on the privacy fences on a regular basis. Once the contractor has finished his job, hire professional real estate inspectors to check in on everything, especially the plumbing and the electrical lines.
Stage the Property
Once the main work is done, all that remains is the staging process. This involves making the property seem more alluring for the target buyers. For example, if you are trying to sell a home to a family, it might actually be a better idea to give the house a lived-in look, rather than dressing it up as something that looks like a picture from a brochure. Know who the potential buyer for the evening is and then stage it accordingly by adding little, relevant touches to the property.
Although nothing can beat real, first-hand experience, one can certainly get a head start these days, thanks to the internet!
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