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Fix repairs during a Real Estate Rehab like a pro

Real Estate rehab is not as easy as it looks on the TV shows. But if you take the steps in the correct manner, you can get some good money by flipping without much difficulty. The most important phase during a real estate rehab is fixing repairs. Your profit from the whole transaction while flipping a house depends upon it. Renovation and repairs is not a thing you can take lightly. So, you should keep the points given below in your mind while doing real estate rehab.

1. Start with a checklist to get to the gist

You should start with a checklist before buying a property. This checklist comes handy while estimating repairs. Bring your contractor to the property walkthrough. Take pictures of the parts of the property that require repairs. Check the exterior curb appeal and the interior environment of the house. Write down the problems in the walls, flooring, kitchen, HVAC, electrical connections, bathroom, plumbing, painting, doors and windows, and staging. Roof, gutters, landscaping, fencing, septic system, etc., may also need repairs. Also, check for molds and termites, if any, in the house. Note down all these things in the list along with all the additions you are thinking to make for the real estate rehab.

2. Be considerate, get the estimate

After you have noted all the provisions you have to make in the property, it is the time for making an estimate for the repairs. With the approximate measurements in hand, you can now estimate the cost of fixing repairs in a real estate rehab. Calculate the cost of repairs per unit. The experience becomes important for such approximation depending on the number of repairs required. Calculate for about 1.25 times of the materials required as wastage may occur. Your contractor can provide you with an idea of expenditure on labor. Repairs can be in square feet, linear feet or in any other unit accordingly.
Multiply the cost per unit to the number of units which require repair (cost per unit X no. of units which require repair). Add the costs for all such repairs and the additional items. This would provide you with the amount required for fixing the real estate rehab. Add 20% to the above cost for any unforeseen expenditure for repairs to arrive at the final estimate. Use the final estimate obtained as above to ascertain the profitability of the real estate rehab project for flipping.

3. The contractor is the anchor

Many states in the US require hiring a General Contractor for a real estate rehab. If you don’t want to get involved in making all the amends in the property yourself, hire a contractor. The general contractor hires the subcontractors and supervises all the work. Create a list of the contractors whom you would like to hire after checking the state’s consumer protection agency. Check the history of the contractor, his license, permits and equipments related to this field. Also, get to know about the experience of the past clients with the contractor during real estate rehab. Visit a job site of the contractor, if possible.
Don’t fall for the low bid. Go with the contractor with whom you are comfortable and who has a good experience in real estate rehab. Finally, draw up a contract and put everything in writing such as the start and the end dates of the project, specifications of the materials to be used, payment schedule, compensation payment of the workers, and other details to ensure that the work is done accordingly.

4. Judicious payment, no worriment

Contractors tend to ask for upfront payment to start the works in a real estate rehab. Don’t pay a large sum beforehand. You may have to run after the contractor to get your work done in such a case. Most of the contractors ask money for buying the materials. You can pay directly for the materials to his suppliers and get them supplied at the site. This would ensure that your money isn’t spent elsewhere. Also, make the payment for labor only after you have inspected the site and you are satisfied with the work.

5. Documents of importance

After all the work has been completed for the real estate rehab, you need to get these documents from the contractor –

  • W-9 – Get the contractor to fill out the W-9 form for the real estate rehab project. He has to fill his employment details, Social Security no. and other relevant details in the form. Don’t bypass this by using cash as then you would show much more income than you actually made. Also, it helps you to build the 1099 form at the end of the year. If you don’t get a W-9 from the contractor, you would have to seek it later from and waste your time.
  • Lien waiver – It states that you have made the full payment to the contractor for his work. Get a full lien waiver signed by the contractor at the end of the repair work in the real estate rehab project. You can also get a partial lien waiver when you pay certain installments for the work. But make sure to get the full lien waiver when you make the final payment to the contractor.
  • Invoice – Invoice is necessary after the work is completed during a real estate rehab. It can be a word document, handwritten or in any other form that provides a proof that you have made the payment to the contractor for the given work.

If you want to avoid unnecessary complications while you are carrying out the repairs in a property, use the above tactics for streamlining the work. I hope that the above points would prove useful in your real estate rehab project.

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