Learning how to rehab houses gives you the best chance of building a sustainable real estate business that will open other opportunities for you. For many a successful real estate entrepreneur, rehabbing is where they cut their teeth. It’s where they gained the skills and insight necessary to build a foundation leading to other opportunities in real estate investing.
When rehabbing a house, there are six main stages of the process:
Stage 1: Pre-Construction - As soon as you close on a property, you want to get to work; after all…time is money. Below are some basic tasks to consider –– in some cases you can complete them before the house closes:
- Secure the Property - If you’re buying properties in a tough area, board up the windows and secure the locks. Even if the property is in a nicer neighborhood, rekey the locks; you never know who had a key to the house before you bought it. Have a few keys made and put a lock box on the front door so that your team can get in and out of the house.
- Switching Utilities - Put the utilities into your name (or company name) and have the date they are turned on coincide with the closing.
- Plans & Permits - Do things the right way and get your permits (construction, plumbing, electrical) before you begin work. This is also where you really nail down your “action plan” and begin lining up materials and scheduling skilled trades to do work.
- Foundation Repair - Account for the additional work and risk by buying the property cheap –– as low as 50-60% of market value minus repairs.
- Pest Control - This is a good thing to have on your list, but not always necessary. If you find a house full of fleas, termites or other critters...then make that call.
- Plumbing Pre-Demo - Have your plumber assess the property. Valves should be shut off, and any old appliances should be disconnected and removed.
- Electrical Pre-Demo - Unhook any appliances and fixtures that will be replaced. Any wiring that is in the path of something that will be demoed needs to be removed.
- Demolition - You need to have a good cleanup crew that is willing to go in and take on a dirty project. Once the house is cleaned out and the electrician and plumber have done their thing, begin tearing out the cabinets, walls, counters, etc., that you want to replace. Afterwards bring in a cleaning crew to sanitize, rid the house of pet odors and clean up the yard.
Stage 2: Rough Structure – Most of this work will be done above ceilings, below floors or in walls. Be on-site for as much of the work as possible, and keep a close eye on the cost of materials and labor.
- Rough Plumbing Under the House or Foundation - Rough plumbing takes place when you buy a house that either has a change of layout as part of the rehab, or you’re replacing pipes. If you buy low and have confidence in your plumber, then you should feel confident about making the repairs and turning the house for a good profit.
- Framing and Sub-floor - Remove any rotted wood. This may or may not involve structural work. If it does, then you’ll need to have an engineer on board as a part of the process, and you’ll need permits. Typical situations involve removing sub-flooring in bathrooms and kitchens, though porches, stoops and steps are also on the list.
- Exterior Doors - Replace any doors that are damaged. Know what the codes are for exterior doors in the area of the subject property, and buy accordingly.
- Windows - Replace those windows that need replacing. This can be a money item because it’s not just the windows, but the cost of installation and the potential repairs to the walls, casing and trim. But by strategically placing new windows, you can amp up a standard rehab project.
- Siding - Consider adding siding if you’re in an area where you’ll get a good return on your money. Otherwise, paint the exterior...but do one or the other.
- Exterior Trim - Window sills, window trim, eaves, door trim, corner trim and the fascia and soffit.
- The Roof - When inspecting a roof, look for curled, faded or missing shingles. Note how many layers of roofing material are on the roof. Ideally, two layers, maximum is acceptable. Pay attention to any weird angles that may indicate that the roof decking is rotted or slowly weakening. Work with a good roofer to get an estimate of costs to repair. Typical repairs include replacing shingles, flashing and vents.
Stage 3: Mechanical Systems - Stage 3 tasks can and will overlap with Stage 2, which leaves plenty of opportunity to lose track of what’s being done, by whom and for how much. You really need to stay on top of things, or costs can get out of hand.
- Fireplace - Get a chimney sweep in for a cleaning and an inspection.
- Rough Heating, Ventilation, and Air-Conditioning (HVAC) - Have a good HVAC specialist to check out the system - the furnace and air-conditioning unit, exhaust fans found in bathrooms, attics, kitchen, etc.
- Plumbing in Walls, Ceiling and Attic - Begin running new pipe in the walls, ceilings, etc. You’ll need to have all appropriate permits for this task. Complete any prep work for new appliances.
- Rough Electrical - Bring in your electrician to run wire and install junction boxes. Make sure you’re using a licensed electrician and that everything is up to code.
- Insulation - Once plumbing and electrical are installed and inspections have passed, begin insulating the exterior walls.
- Concrete Work - For a driveway (or apron), walkways and patios.
- Septic - These can be an expensive nightmare...and before you even buy the house you need to have a report examining the septic system –– paid for by the seller, if possible.
Stage 4: Unfinished Surfaces - This begins the work that people can see. Just like in the other stages, you need to stay on top of scheduling and costs.
- Drywall - Hang, tape and fix any issues with the walls and ceilings.
- Garage Doors - Adding a new garage door is a great way to add curb appeal, but is not a necessity.
- Gutters – Examine whether downspouts and gutters need to be replaced.
- Wood Floor Installation - In certain situations we will refinish wood floors, especially if the house is located in a great neighborhood. Rarely will I install new wood floors, unless I am excited and sure by the potential of a project.
- Cabinetry - Line up a few choices you prefer for your kitchens and bathrooms. Go with a cabinetry company that knows what you want, and can begin managing the process early when you’re just starting the rehab.
- Interior Doors – You can either buy a pre-hung door that is attached to the jambs and has the door handle hole already drilled (along with the hinges), or buy a “blank” door and hire a carpenter to drill all the holes, etc. When installing doors, there’s a lot of trim work to be done.
- Housekeeping - If you’ve done any of the above, then you’ve created a mess of pieces, parts and dust. Clean it all up. Get rid of the dust and debris, and begin prepping for the paint.
Stage 5: Finished Surfaces – This is where your vision comes together to create a product that is functional and pleasing to the eye. If you’ve managed to keep track of workers, materials and expenses, then you should be on budget to begin the cosmetic changes.
- Interior and Exterior Paint - The standard paint for interior spaces is latex, which is easily washed up with water. The shinier the paint, the easier it is to clean.
- Countertops – Granite, poured concrete, engineered stone, wood, ceramic tile, solid surface, or plastic laminate. Like every other decision you’ve made, you want the cost to be congruent with the type of rehab you are doing.
- Tile - Install tile anywhere in the house where you want it. For basic rehabs, you’ll use vinyl instead. For your standard rehabs you’ll end up using an inexpensive tile to enhance the aesthetic of the house. For a high-end house, spend the money and use high quality materials.
- Vinyl Flooring - The most common flooring used for both standard and basic rehabs…it’s cheap and easy to install.
- Final Plumbing - Make sure that everything...all the lines, pipes, valves, toilets, faucets, etc., is installed correctly.
- Final Electrical - Install the finishing touches (switches, plates, jacks, lights, smoke detectors, etc.).
- Final HVAC - Install new vents and a thermostat, or a new air-conditioning unit outside of the house.
- Finish Wood Floors - Either finishing or refinishing wood floors is the final task for this stage. Once done, you’ll want to keep traffic to a minimum as a way to avoid any unnecessary damage.
Stage 6: Final Details - In this stage, address all those details that, at times, will seem endless. Here are the small things that can add up to a fast sale at full price:
- Small Additions - There’s much you can do on a standard rehab to make it seem more appealing:
- Brass kick plate for the front door
- Two-piece front doorknob
- New knobs for the kitchen cabinets
- New interior doorknobs or handles
- Brass house numbers
- New doorstops
- New switch plates
- New towel bars
- New bathroom mirrors and doors (if an upgrade is necessary)
Appliances - We’ve enjoyed consistent success using a local turn-key appliance company, or you can use Home Depot or Lowes.
Carpet - We alternate between plush and Berber, depending on the neighborhood.The color is always neutral, and the carpet is always installed near the very end of the project so it doesn’t get soiled or damaged.
Landscaping - For a standard rehab, clean the yard, edge the walkways, edge the flower beds, and do some basic trimming. Remove any debris.
Staging the House - Consider bringing a local designer (who is inexpensive) onto your team who can help accessorize the property. You don’t have to spend a lot of money to make a house attractive and inviting.
Final List of To-Dos - The list you make after walking through the house and taking note of the few remaining items that either need to be completed or are unsatisfactory.
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