Like any successful endeavor, when you’re ready to rehab a property, you need a plan. A surefire way to waste valuable time and money is to go into a project helter-skelter—everything needs to be done according to a plan and in the right order. Here are some tips that can help you on your next property renovation.
DUE YOUR DILIGENCE
First things first—walk the property inside and out. Make thorough notes about repairs and upgrades you want to make based on your exit strategy. Assess the neighborhood where the house is located and choose improvements suited for the area or renter. Over- or under-improving a house can make it harder to find a buyer or tenant. These things should also be part of your budgeting process:
- Anticipate problems and plan contingencies. All budgets need a plan B.
- Factor in holding costs, sales commissions, and other expenses that can eat into profitability.
- Make sure that your after repair value (ARV) or rental rates are properly analyzed. Local realtors are a resource to assist with ARV estimates and rental comparables.
- Ask other investors for contractor referrals. Make appointments with them before closing on the property—remember that good contractors are booked in advance. Have a detailed plan of your project ready to share to ensure all contractors are on the same page when it comes to deadlines. Request examples of their work currently in progress.
UNDERSTAND AND WEIGH YOUR CAPITAL OPTIONS
Accessing capital quickly and easily allows an investor to be competitive when there are multiple bidders and helps them avoid costly delays with the renovation schedule. Once you’ve determined the expense of purchasing and renovating the property, decide the type of financing that works best for your situation. There are 2 options most real estate investors use:
- Traditional lenders typically fund only part of the purchase price and zero for renovation. This lending process can take as long as two weeks to get the loan approved. It can take an additional 30-45 days to obtain funding.
- A hard money lender can typically finance the full purchase price plus renovations through a quick and simple process. Speedy access to funds is important when you are rehabbing a property to avoid delays in the project. The entire process from application to funding can be accomplished within a week in most cases. There is usually minimal documentation required from borrowers.
CREATE A TIMELINE
Your general contractor, if you work with one, can help you create a realistic calendar for the project. If you decide to handle it yourself, schedule out the weeks and service providers first. Don’t schedule all providers at your house on the same day. No one will be happy and it will delay progress. For example, week 1 might include some initial visits from contractors like the plumber, roofer, and electrician, and perhaps some interior painting. Week 2 might include installation of ceiling fans, fixtures and new doors.
For a list of items that will need to be repaired, see our blog titled “5 Inexpensive Rehab Tips for Your Next Flip.”
PREPARE FOR THE UNEXPECTED
Weather doesn’t always cooperate with your schedule so check the five- or 10-day forecast when planning your exterior work schedule. Rain or freezing temperatures can squash plans for exterior painting, landscaping, roofing or siding repair.
Some cities permit approval processes can take longer than others, so provide for extra time your schedule to accommodate these delays.
TRACK EXPENSES AS YOU GO
It’s important to know where your money is going at all times. Compare actual costs to the estimates in your budget and make adjustments as needed. You don’t want to discover at the end of the rehab that you’re way over budget. Additionally, if you see halfway through that you’re under budget, you might be able to add some additional cosmetic upgrades to enhance the look of the home even more. Use computer tools like Excel spreadsheet or QuickBooks to make the process easier.
SUPERVISE OR DELEGATE
If you can’t be at the site often, hire someone to project manage the progress to ensure a quality project that is completed on time. Mistakes cost money and time. If, for example, a worker installs the wrong tile, taking it all out and replacing it with the right tile will extend your timelines – and that’s on your dime.
SAFETY FIRST ON THE JOB
Improperly stored materials can be an accident waiting to happen, so take the time and care to store them properly – not in the way of your workers. The last thing you need is to have a worker injured falling over a box of floor tile, or trip over tools lying around. You also don’t want paint or other debris splattered on new cabinets or appliances, so move them away from the work area. Consider placing materials in the garage.
THERE IS A RIGHT ORDER FOR DOING THINGS
Follow this rehabbing sequence to keep your project running smoothly:
- Demo: Tearing out old materials such as carpets, tile and baseboards creates a mess of dust and dirt
- Install flooring
- Install new cabinets, countertops, fans, fixtures and wall switch plates
- Install fixtures, ceiling fans and other items
- Bring in your appliances
If you hire a contractor, ensure that the above sequence is followed.
Investors typically want a quick-turn around on their properties and that’s where a hard money loan can help. Talk to a hard money lender about financing renovations for your properties. The approval process is easier and faster than traditional loans and that means you can get started on your renovation sooner rather than later.
ABOUT LONGHORN INVESTMENTS
Longhorn III Investments, LLC is a direct private lender offering short term acquisition and renovation capital to real estate investors for both residential and commercial assets. We operate in major metropolitan areas throughout Texas, Missouri, Indiana, and North Carolina. Highlights of our loan program include:
– Up to 70% of ARV (after repair value)
– Finance up to 100% of cost
– Close in 3 – 5 business days
– No income requirements
– Streamlined, simple approval process
– No pre-payment penalty
Longhorn was formed in 2008 and has funded over 1600 loans since inception. Our complementary businesses include a title company and real estate law practice operating out of our corporate office. Our wealth of experience puts us in the unique position of being able to help investors through all aspects of each transaction.