So, you finally get over the FEAR of purchasing your first investment property.
You create a scope of work, a budget, a schedule. You feel that this whole investment thing is going to easy.
First week into the project, the demo begins. Contractor calls you up & says "We have a problem" (not words you want to hear to often). "The electrical issue was much larger than expected, its going to cost 9,000 instead of 3,000".
What do you know, there goes Change Order #1, a week into the project.
The second week of the project begins, as the contractors are finishing up the demo, they begin opening up a few walls since they will now have to rewire the majority of the house.
You get a phone call from your contractor, "We have another problem, the majority of the exterior walls of the home are not insulated"
Here we go again.....
"Its going to cost us about 5,000 - 7,000 to demo the walls, re insulate and re sheetrock"
Change Order #2 has arrived and your only 2 weeks in. Now your thinking. Damn! This is going to get ugly. Start questioning yourself on the buy, what you should have done differently, consulting with your GC about how we missed these things.
Believe me there is nothing worse than having to work FOR your business, rather than ON your business.
But.... when these unforseen costs begin to arise, sometimes you have no choice. You have to put in some sweat equity and begin to relinguish some of the labor costs that will put you over the top of your budget.
5 Areas To Do The Work Yourself To Minimize the Damage
For some of us in this game, I wouldnt say we are the most handy of people. Might sound wierd that your in the flipping business but are unfamiliar with repairing homes. So for those of us who arent the most handy and need ways to help out the rehab, these areas of work are meant for you!!
1) Landscaping:
The curb appeal of your home is one of the key factors home buyers focus on when purchasing the home. Even though this is an important aspect of the rehab process, with a few pointers you will be able to create a beautiful appearance to the exterior of your home. If you arent the best with design or atleast you dont feel you are capable ask for some opinions. Your general contractor that you are paying to do your rehab should have experience in this area and will deffinitly be able to offer up some valuable advice. Use the internet, ask your girlfriend, your mother (women have good taste, right?) The hardest part of the landscaping is figuring out what you want to do with the area. Other than that grab a lawn mower, a few shovels, some bush trimmers and start going to town. This will save you some good money on your budget. The only negative to all this is that this can be time consuming and it will take some hard work.
2) Interior Paint
A fresh coat of interior paint on your rehabs is usually a necessity. If you have never painted before you may not want to take on this project by yourself. This is a phase of the jobs that if done by yourself can save you against that good old budget of yours. If you have never painted before and still would like to take on this task, I suggest asking your contractor for tips for prep, cutting and rolling or you can also watch some you tube videos on the internet (those are always useful)
3) Exterior Paint
This task is a little harder to complete by yourself because it can be very time consuming and labor intensive. If the home that you are rehabbing is ranch style you will have a better chance of accomplishing this phase by yourself. At this point I would suggest trying to get a couple buddies together to help you. If you can get free labor from your friends or family sometimes you have to leverage the oppurtunity.
4) Final Cleaning
The final cleaning of your rehabs should almost always be professionaly hired out. Since there has been construction going on for the past how ever months there will be dust & debris stuck in small places all over the home. In saying that if you cant afford to cough up any more change you can always take on this phase. Just make sure you are very thourough with your cleaning because when you are showing the home to potential buyers, one of the first things they notice is how clean the place is.
Conclusion
Sometimes, we find ourselves in a position where we need to cut costs mid project to ensure we make a profit or atleast break even. The majority of your rehab cost on a project will be from the labor of your workers. If you can find ways to cut back on those labor costs in different areas of the project, you will find a good chunk of savings throughout your project.
* Dont get wrong, there is NOTHING worse than working for your company*
Your goal for every project you take on, is for it to run smooth and on schedule. As we all know, This usually isnt the case. So when unforseen costs do arise in the middle of a project, try not to panic (will make it worse). Always try and think of solutions rather than excuses & some of the tasks we touched on are potential solutions for cutting back on your budget.
*Stay Positive, Work Towards Your Goals & Keep Grinding*