So, let’s see how this works.
You are an investor who has just scored on a really great, no let’s make that a fabulous investment property. This is a sweetheart of a deal and not one that comes along with any sense of regularity.
You do your due diligence, get your inspections and your financing in place and get ready to score some major return on your investment capital.
But wait, you have to first rehab the property and put it into a condition that will be acceptable to someone who wants to rent your property or to buy it.
You need a contractor to do the work for so you so that you can continue on with your plan.
Now, you are faced with a conundrum.
Do you go low and hope the rehab work gets done correctly or do you really pin down the contractor as to his scope of work and what you will be getting for your rehab budget?
The more detail you ask for is probably going to work for and against you.
The less detail and description of just what the contractor is proposing to do for you is most likely going to be the cheapest and less expensive bid you must consider, but wait, there is more to this in a moment.
The more detailed description of the work to be done in a proposal should result in the majority of all of your bases being covered and you being prepared to deal with any of those ‘unexpected’ expenses.
You watch the HGTV rehab shows….be honest with me, how many have you ever seen where this has NOT occurred?
About ¾’s of the way into the program, the contractor discovers…(pick one or more):
Plumbing or wiring issues
Code and permit issues
Mold or mildew
Air and heat problems
Of course this is TV drama and the investor ends up shaking their heads and lamenting their opinion that this problem or problems will cause them major financial issues and possibly put them out of business and or ruin their health, lose their hair, cause a divorce etc.
You must be pro-active not reactive and think ahead to the possibilities in your investment strategy. If that hot water heater is 20 years old and is rusting out at the bottom, toss it out and get a new one. Trust me, you will need it.
If this is a buy and hold property and it needs a new ac unit or a new furnace….get it fixed now.
When will the ac go out on a rental unit?
On the Friday before a holiday and your tenant is going to be screaming that it’s too hot or it’s too cold.
That toilet you didn’t want to replace since you think it will be good for another year or so?
You can just about bet this will stop up, overflow and cease to work about midnight also on the weekend.
Don’t get me wrong, you can save money by not doing certain things to improve the property you have bought.
But you do need to think and consider the consequences of your decisions.
If you don’t want to repair a toilet on a rental and it overflows and you lose your tenant, how much did you actually save in the long run?
If the ac and furnace needs to be replaced and you put it off and then lose your long solid and good paying tenant because you could not get the unit fixed over the Fourth of July, then how much did you save?
The contractor you choose should give you a detailed written estimate and analysis of what he suggests is needed to suit your purpose, whether it is a rental or a flip property.
Trying to operate and rehab a property with a written proposal that looks like it was written on a Big Chief tablet with a crayon is not going to serve your purposes in the long run.
You may not choose to do everything the proposal suggests, but at least you have some knowledge about what might eventually be needed.
Another vital point to be considered is when is the best time to complete the work that needs to be done?
Having a crew at your property for three or four weeks and then trying to get them to return after they are finished because you changed your mind about some improvement will only cost you more in time and money.
Contractors cannot afford to send a crew back out to your property two weeks later to paint the garage doors which should have been painted in the first place.
Consider the cost of your time and the cost of your money, what does it cost you in terms of aggravation and headache to get the job done right?
If you don’t deal with a reputable contractor who is willing to identify his work as well as an estimate of the time required to perform the necessary work, then you are kidding yourself.
Ask for references, ask for insurance and ask for a written, not verbal proposal of the scope of work you expect to see completed.