How To Rehab a House
Doing the work to rehab a house, and then completing the sale of the flip for full retail value is surprisingly easy. You practically wake up one day and announce to the world that you are going to become a fix and flip property investor. However, there is a lot of preparation involved before buying a fixer upper, especially the first time you rehab a house.
The steps to rehab a house are a little bit like organizing the steps for an elaborate dance. You’ll need to bring in the right contractors at the right time, and get them back out again without damaging the work completed by your other contractors. It all culminates with a well organized open house at the end. Flipping property may not get you a lot of reviews from critics, but if you fix and flip a house properly you’ll get a standing ovation from your end buyer in the form of a full asking price offer.
There are usually several contractors that you’ll need to bring out to help complete each of the steps to flipping property. You’ll often need an electrician, plumber, and carpenter for the skilled tradesmen portion of the labor. Not to mention painters, sheetrock/drywall guys, landscapers and even designers for some projects. Then there’s the general labor, such as the people you end up hiring to help clear the excess garbage and unwanted furniture, performing a general cleaning and/or basic lawn maintenance that the old homeowner left behind to do.
If you don’t have the time or don’t want the hassle of being the great orchestrator while all the various professionals work on your property flip, you can hire a general contractor. This general contractor has all the contacts, years of experience in remodeling houses and the know how to rehab a house without messing up the property. However, you’ll have to shell out extra cash for the general contractor and deal with his or her opinions concerning the rehab project, but it would serve you well on your first property flip to utilize one to see exactly how they organize everything and everyone.
How to Rehab a House
0. Get PermitsWe call this step “0” because you will need to get permits before you begin to rehab a house in most cases. Sometimes working with the local government can be annoying. If you are rehabbing houses on your own, you’ll have to secure the necessary permits for the work. There are separate permits for roofing, electrical, structure, plumbing and even windows. City officials have an annoying habit of dropping in on the middle of a property flip to inspect it. If you don’t have your permits and you’ve already started on a certain area that requires you to have one, that official can hand you a nasty fine to add to your expenses in addition to shutting down your property flip until you have the permits needed to continue.
1. Visit the Property Daily
This is just a good idea in general when you rehab a house. You don’t want that rehab property to get an overall uninhabited look. It invites trouble in the form of neighborhood kids looking for a place to hang out or thieves looking to steal appliances, fixtures, aluminum siding and the copper pipes in your rehab. You want to be there early in the morning to open up the house for your contractors or the sub-contractors of your general contractor, so that not everyone has the lockbox code to your property flip. Check on their work and talk with the contractors to make sure they are staying on task. In rehabbing houses you become the manager in a way making sure that everything stays on schedule to complete the fix and flip in a timely manner.
2. Clear it Out
As soon as you close on buying a fixer upper, you’ll need to go in and clean it up. That means emptying out any trash or debris the former owners left behind, doing minor demolition of areas you are going to cosmetically improve(damaged sheetrock, kitchens and bath fixtures being the most common), and removing outdated appliances. You can usually hire some general laborers to get this stuff moved out and make sure that the property is clean before you start the real work of adding to it.
3. Start on the Landscaping
This isn’t an absolute requirement as far as the early steps to flip a property go, but a quick mowing and pruning on the house can make it look worlds better. Plus, this helps make it easier for your contractors to wander around the house when they are working on it later on. If the yard is in really bad shape, you will want to have a landscaping company come in and seed the lawn and add fertilizer as soon as possible since it will take a month or more to see tangible improvement. If things are totally destroyed however, you may choose to wait until the end of the rehab to have new sod put down when you go to add the new plants and other decorative finishing touches to improve curb appeal.
4. Bring in the Designer
If you’ve pulled out the cabinets and fixtures in the kitchen or baths and plan on putting new ones in, now is the time to bring in the kitchen designer on your property flip. In the course of rehabbing houses you’ll want to bring in the designer right after you’ve got most of the debris cleaned out, but before you start bringing in a lot of contractors.
5. Bring in the Electrician
You’ll find when flipping property for a few years that most often you’ll be bringing in an electrician or a plumber. Start by bringing in the electrician to do any of the rough work. This can involve running new wiring or replacing an old electric panel. Specify to the electrician that you only want him or her to complete the rough work, stuff that he feels could mess up or damage the property if he did it later on. You’ll be bringing him back out later on for finishing touches.
6. Bring in the Plumber
When completing the steps to flip a house, you can bring out the plumber and the electrician at the same time. Just make sure they aren’t going to get into each other’s way. It is easiest to bring the electrician out a few days before the plumber and ask them to start on any wiring in the bathrooms or kitchen areas first. This way he’ll be done with those areas when the plumber comes in. Also, make sure the plumber completes the rough work only, like fixing old leaks or installing new water lines.
7. Bring in the Carpenter
The carpenter can get started on the exterior of the fix and flip if the electrician or plumber are still working inside, such as by replacing damaged wood siding, fencing, or decks. Inside the house, they’ll work on replacing doors, fixing wood flooring, creating new walls and start creating new trim and molding. The carpenter will also work on structural damage such as sagging floors, but you shouldn’t try buying a fixer upper in need of serious structural repairs unless you are really experienced.
8. Bring in the Sheet Rock Person
Once your carpenter has completed all of his work, the next step to flip a house say is to repair or replace the damaged sheet rock. This is the hard material that you put on your walls that you will end up painting or wallpapering. So, if you have any damaged walls or need sheet rock on a new section of wall, the sheet rock person will put it up.
9. Paint it
Now that the sheet rock and dry wall is up you can paint all the rooms. Remember when you rehab a house you’ll want to paint in neutral colors so that the homebuyers won’t find it garish or overwhelming. Right now, it is best to paint the walls a beige color with easy to clean semi-gloss in the kitchen and baths, and flat paint in the living areas and bedrooms. You will want to use an easy to clean white gloss paint for all of your trim to help make the house appear more fresh and clean, and offset the color of the walls a little more for the ideal neutral color combination.
10. Lay Down the Flooring
Once you’ve got the painting done in the kitchen and bathrooms, use this period to put down your tile floors or linoleum. This way your flooring stays fresh and there’s less risk of damage. Wait until the painters are done completely before laying carpet.
11. Finishing Touches
Once the sheet rock is complete, you can start bringing your contractors back in to complete their finishing touches on your property flip. Start with the electrician and the plumber. The electrician will need to finish installing new lights or ceiling fans, and making sure all the outlets and switches function correctly. The plumber will work on installing new fixtures, setting the toilets in and so on. You will have the carpenter come back at this time to install the cabinets in the kitchen and baths, as well as the trim or molding around the floors and ceiling. You will also want to have any new appliances in the kitchen installed at this time.
12. Curb Appeal
Many times when you flip a house it will have a neglected and terrible looking lawn. As you can imagine, if the homeowner didn’t have the time, money or inclination to keep up maintenance on the house, then they probably didn’t keep up the landscaping either. You can increase the value of your fixer upper houses by doing more to maintain the lawn and even by adding to the current landscaping a bit. Most potential buyers want to feel like they are coming into a nice home as soon as they pull up to the drive. That means making sure the exterior looks just as good as the interior.
According to the Turf Resource Center, a study conducted by Michigan State University and funded by the Horticultural Research Institute found that high quality landscaping can add as much as 5% to 11% to a house’s value. By just fixing up the lawn and keeping it maintained while you are selling the rehab property you can turn a $100,000 home into a $110,000 home. You don’t need to spend a few grand, sometimes just a couple hundred bucks is enough when you flip a house to improve the lawn to as nice or nicer condition than the rest of the neighborhood.
Neatness is important. Make sure you have the lawn mowed, edges trimmed, weeds pulled, and no grass growing in the sidewalk or driveway. Next, add some fragrant plants near the entrances to make the house smell better and give a great first impression when people walk up the front door, and mint or lemongrass near the back door will give it a fresh scent. Add a few flowering plants to give the front some color such as tulips, lilies, marigolds, roses, or whatever else is appropriate for your climate. Finally, make sure you water and fertilize correctly to keep the lawn green and plants healthy.
13. Marketing to Sell Fast
Flipping property isn’t like selling foreclosures or wholesaling houses. You don’t want to start advertising the property at the beginning of a rehab or even in the middle. Most traditional homebuyers want to see a house in its finished form, and won’t even make an offer if the fix and flip property has holes in the walls, plumbers wandering around and roofers stomping around upstairs. Hold off on the advertising part or placing the property with a Realtor until it’s about two thirds complete. This way the buyers know that there is a property available and you can start spreading the word just in advance of your first open house when that property flip is complete.
When you flip a house, you’ll usually be attempting to bring in the traditional homebuyer for the sale of the property. This is instead of selling to another real estate investor as you might with foreclosures, short sales or wholesale investment property. Be sure to keep this in mind when creating an exit strategy for the fixer upper houses you buy. Everything you do should be aimed towards the homebuyer looking to live in your home. After you’ve finished remodeling the rehab property it’s time to put it on the market. If you don’t want to deal with finding all the potential homebuyers yourself go ahead and sign with a good realtor. If you decide to sell the house yourself, or just want to have more of a hand in the advertising, here are the top three proven advertising methods for you to use to get the home out there.
Bandit Signs: No matter if it’s ‘For Sale by Owner’ or a realtor sign, the bandit sign is really important for flipping property fast. Place a sign on the front yard of the property with your phone number on it for interested buyers to call. Also pick up smaller 12x18 ‘For Sale’ signs with an arrow and place them at nearby intersections to direct people driving through the area towards your house for sale.
Classified Ads: Place an ad in the local newspapers and real estate magazines to advertise your recently renovated property flip. Homebuyers love looking through classified ads on the weekends for their next new home. Make sure you list the address, a phone number, number of bedrooms and baths, and the asking price. These are the basics. If you are planning on having an open house make sure to place an ad starting in Wednesday’s paper going through until the day of your open house. This gives homebuyers plenty of time to mark the date of the open house on their calendars. Post your ads in the local newspaper, as well as online classified sites such as Craigslist, Backpage, and Postlets. More and more people are searching for a house online, so make sure they see your completed property flip.
After you rehab a house, you’ll want to hold a few open houses for homebuyers to come out and look at your like-new property flip you just completed. It’s a great way to raise local interest in the home and get a bunch of people’s contact information all at once. Even if they aren’t interested in this house, you may have some other fix and flip houses that the homebuyers will be interested in. Stage the home so it looks nice, smells nice and feels nice to anyone walking into the property. Put out a bouquet of fresh flowers, and toss a couple of trays of chocolate chip cookies in the over. The best Realtors do it when they have open houses, and you should too.
Congratulations, you are now ready to start buying a fixer upper and completing your first property flip! When you rehab a house, it is like any other business; it will take you some time to learn all the ins and outs of flipping property and you will make mistakes. But, after you flip a house for a decent profit, we guarantee you will want to continue with your fix and flip business. Even if you only do it once in a while in addition to your other real estate investing activities.