Thursday, January 18, 2024
You and I both
know that the majority of money is made two ways in real estate. First, buying
properties under market value. Second, is
adding value (by way of property rehabbing) to increase the property’s
value. But managing
property rehabs, and staying on budget, can be a daunting task. The last thing
you want is to find yourself in the middle of a rehab project with cost
overruns or unexpected expenses that blow your budget out of the water. Hey, we've all
been there and I've learned a few things along the way that I'd like to share
with you in this blog article.
Here are 10 things you can do to better manage your budget while making repairs and improvements.
Get the best value for your money and avoid going over budget:
Don't miss out on these essential tips for managing your property rehab costs.
Read on for the whole story!
The first step in managing property rehab costs is to set a realistic budget.
Take the time to thoroughly assess the property and identify the necessary repairs and improvements.
Consult with contractors and other professionals to get accurate cost estimates for the work that needs to be done.
Before you start any property rehab project, it's crucial to have a detailed plan in place.
This plan should include a budget for each part of the project, a timeline for completion, and a detailed scope of work.
This will help you stay organized and focused on the tasks at hand, and it will also help contractors understand the scope of the project and provide accurate quotes.
When it comes to hiring contractors for your property rehab, don't settle for the first bid you receive.
Always get multiple bids.
Get multiple bids from different contractors to compare and ensure you're getting the best value for your money.
Don't forget to check the contractor's references and previous work to ensure they are reliable and have a good track record.
(You get what you pay for. Don’t say I didn’t warn you.)
Don't be afraid to negotiate prices with contractors and suppliers.
You may be able to save money by asking for a discount, especially if you are providing them with repeat business or a large volume of work.
You don’t know if you don’t ask.
And let me tell you, saving 5% here, and 10% there really starts to add up.
Whether it goes back into your pocket or covers unexpected expenses it’s worth it to ask.
It's important to remember that you're not rehabbing the property for yourself, but for potential buyers or renters.
Complete the most critical repairs first, such as those related to safety, structural integrity, and code compliance.
Because the last thing you need is a lawsuit….
Then, focus on making improvements that will provide a good return on investment the property.
Over-improving can lead to an inflated budget that may not be recouped through higher rents or resale values.
Be mindful of the cost of fixtures and finishes, as they can quickly add up.
Know your neighborhood and market. You don't always have to use the most expensive materials to achieve great results.
Look for cost-effective alternatives that will still look high-quality (with good durability for rentals).
Think Luxury Vinyl vs. Engineered Hardwood.
OR
Laminate Countertops vs. Stone
Stick to a standard level of finishes and fixtures that are comparable to other properties in the neighborhood and market.
Time is money in the world of real estate investing.
Delays can result in increased holding costs equally lost profits. It's essential to keep an eye on the schedule and ensure that the project stays on track.
So, don't wait until the end of the project to inspect the work. Regularly check in on the progress to ensure that the work is being completed in a timely manner and to your standards.
By being proactive you can catch any potential issues early on and avoid costly mistakes and delays down the line.
If you have the skills and time, consider doing some of the rehab work yourself.
This can help you save money on labor costs, which is by far where most of your property rehab budget is going.
Just be sure you have the skills to do the work properly and safely.
No matter how well you plan, unexpected expenses can still come up during a property rehab.
You always want to have a contingency plan in place to cover unexpected expenses.
Set aside a portion of your budget as a contingency fund to address any unforeseen issues or costs that may arise during the rehab process.
I recommend adding an extra 10-20% to my rehab budget to account for any unforeseen expenses that may come up.
Throughout the property rehab process, keep detailed records of all expenses and receipts.
This will not only keep you organized when tax season comes but also provide valuable information for future projects.
Managing property rehab costs can be a challenging, yet rewarding, process.
But, if you’re anything like me, the ultimate goal is to achieve financial freedom and build generational wealth.
So, utilize these 10 budget-saving tips and profit more, not less!
Good luck with your next rehab project!
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Hey real estate investors! If you liked these tips, check out all the essential strategies every real estate investor needs to plan and manage successful property rehabs. Don't miss out on this game-changing resource!
(a.k.a. ""The Real Estate Rehabber")
Bestselling Author, Real Estate Investor, and Entrepreneur
I want to empower new and seasoned real estate investors alike to navigate the challenges of property rehabbing with confidence.
These resources include essential tips and insights, that every real estate investor can use to excel in the competitive world of property rehabbing.
Whether your goal is to flip houses, create long-term rentals, or execute the buy-rehab-rent-refinance-repeat strategy, "The Real Estate Rehabber" will educate viewers on how they can plan and manage property rehabs.
