7 Steps to Outsourcing Improvements

In real estate investing, the renovation piece of the puzzle is a tricky one for some investors.

From floors and walls to electrical and plumbing, there is a variety of work your properties may need in order to maximize the appreciation, and it is important to know what steps you will need to take and how to outsource them.

Let's cover our 7-step system for outsourcing improvements that's proven to work over and over and over again over the last 10+ years on hundreds and hundreds of projects.

7 Steps to Outsourcing Improvements

Step #1: Pre-Planning

It is imperative to begin construction planning the DAY you get the property under contract. Those 2-3 weeks you have between getting the property under contract and closing are some of the most important.

Walk through the property at least twice with your contractor and develop a specific Scope of Work with all the materials spelled out down to the SKU #. Discuss the budget and timeline for work completed and payment with your contractor.

Plan ahead and know the permitting process for your city so you can get the work started on time. You should also agree on a timeline for work completed and payment.

The most important part of pre-planning is making sure on the day that you buy and own the property, that you can begin the improvements right away. We want to have 3 systems that we've agreed on with our contractor during the pre-planning phase:

• The final budget - how much exactly are we going to be spending for materials, for labor and for the general contracting fee. The final budget is made up of these three things. Our rule of thumb is that the materials will be approximately 60% of the budget, the labor will be approximately 40% of the budget and the general contractor fee will be an additional 10-20% of the labor and material. The final budget needs to be agreed upon in a signed contractor agreement.
• The final schedule - what specific improvements are going to be made each week over the course of your renovation project. This is pretty simple. Document each week exactly what's going to be worked on and by whom.
• The final Scope of Work - the Scope of Work is your extremely detailed renovation plan. Every piece of material, every subcontractor, the final cost for materials and labor, the types of finishes, the colors of paint, styles of cabinets, countertops, backsplash, bathrooms, kitchens, the type of hardwood or flooring, the styles of lighting - it's all documented in finite detail in the Scope of Work. This will be your most thorough, detailed document of all three.

Step #2: Pre-Demo & Demo

The demo process takes 1-2 weeks, sometimes less. During this phase, it is important to contact the utilities companies. You will want to make sure all the utilities including the electric, gas, water and sewer have all been switched over to your company. You also want to change all locks on the property on Day 1 and purchase a lockbox for easy access.

This is the time to order a dumpster to keep on-site for about 2 weeks during your demo process. Remove all cabinets, flooring, appliances, walls and windows that you are not re-using. Create a list of what you are going to keep such as windows, siding, the roof, gutters, flooring, etc. in the Scope of Work.

Make sure you have purchased insurance, which will run you between $1,200-$2,500 per year. We recommend binding your policy with replacement cost and not just acquisition cost.

Companies that we recommend using are either Foremost or American Modern.

Step #3: Mechanicals

You will need to test out and take the steps to repair all the utilities including HVAC, electrical and plumbing. This typically takes around 2-4 weeks depending on how much electrical and plumbing needs to be moved or updated. Electrical and plumbing work always needs to be done by a certified and licensed electrician or plumber. They usually charge by the hour, between $40-80 an hour, depending on where you live.

Step #4: Patch and Repair the Walls

This step is necessary, especially when you buy bank-owned properties. The length of time depends on the size of the project; the larger the project the larger the square footage. It could take a couple of days or as long as eight weeks. Steps may involve:

• Patching and fixing the walls
• Repair and replace drywall
• Patching nail holes in the walls
• Prepping walls for painting

Step #5: Paint

Depending on how large the property is, this takes about 1-2 weeks. Paint the house, including: doors, trims, walls, and ceilings. If you are hiring painters, keep in mind they usually prefer to have the property to themselves for those days so there are no distractions or people to paint around.

Step #6: Installations

This will involve primarily kitchens and bathrooms, including counter tops, cabinets, toilets, sinks, mirrors, windows and landscaping. Make sure the cabinets, counter tops and appliances you choose meet the price point of the home. You can typically buy a stainless-steel kitchen pack with a fridge, stove and microwave from Lowe's or Home Depot for about $2,000.

Step #7: Flooring and Final Touches

Install carpet (or get it professional cleaned), tile, hardwood and laminate floors. Then get new appliances installed. You may also need to give the landscaping a bit of a sprucing up to improve curb appeal.

Rinse and Repeat

No matter what type of property you are dealing with, the process is the same. It will be these seven steps. The only difference between a four-week project and a three-month project is the size of the property and the amount of work needed. By keeping the process as systemized as possible, you will eliminate much of the trial and error that people new to flipping often experience and you will undoubtedly save yourself valuable time and prevent some massive headaches.

However, there will be times when you have to change your plans and adjust for those unexpected challenges that are bound to happen once in a while. Stay flexible!

So whether you are dealing with a contractor who doesn't show up for work, or supplies that take too long to be delivered... whatever the issue might be, this 7-step process still provides the guidelines you need to stay on track in order to get your projects done on time and within budget.

To learn more about how to keep your renovation on time and on budget, join me on this new class I am currently teaching.

Be Daring,
Josh