How to Rehab a House on a Budget
Updated: Jan 24
Are you looking to rehab a house but worried about staying on budget? You're not alone! Rehabilitating projects can get expensive fast, especially if you don't take all costs into account and plan accordingly. Lucky for you, we're here to walk you through the full fix and flip process so that you can learn to budget appropriately.
A house rehab, also known as a fix and flip is the process of buying property, renovating it and selling it for full market value. Labor, supplies, and permit costs are the three fundamental costs of a rehab project, and the process might take anywhere from six weeks to six months to complete. The expenses and returns of each rehab will vary, but our nine-step strategy is a great place to start for new investors. So let's get started.
The first step in determining whether a rehab project will fit into your budget is to analyze the property with the help of a professional inspector. An inspector will spot places that need to be corrected and will spot issues that you might not notice on your own. The HVAC system, electrical system, plumbing, foundation, roof, flooring, walls, ceilings, windows, doors, and insulation will all be examined during a home inspection. Pro tip, be sure to take pictures and detailed notes during the walkthrough.
The second step is to establish a project checklist. This should be aided by the notes you took throughout the home inspection walkthrough. Everything that needs to be repaired or updated, as well as the cost of each repair, should be on your checklist. The purpose of the checklist is to show off the complete scope of your fix and flip project after you know how much the total rehab job should cost.
Another element to consider is the return on investment, which is especially important for individuals looking for ways to restore a house on a budget. Investors on a tight budget must tread carefully between cost-effectiveness and great returns, since certain rehabs can end up costing you more than they're worth.
Create a budget: Once you've compiled a list of what needs to be repaired for health and safety concerns as a result of your house inspection, you can begin estimating the cost of each renovation job. You'll almost certainly have to factor in the cost of cosmetic changes as well. At the very least, itemized components of your budget will contain the cost of supplies, permitting, and labor.
Interview contractors: The difference between a good rehab and a fantastic rehab is working with an experienced, quality contractor. Make sure to seek referrals from your personal network and to thoroughly check references. You should also make sure that your contractor is someone with whom you can envision yourself working in the next weeks and months.
Schedule a property walkthrough: Once you've hired a contractor, schedule a time for the both of you to go over the property together. This is when you can point out the various projects you have identified due to your initial inspection. You should be able to change your timeframe, budget, and checklist with the help of an expert contractor.
Obtain any necessary construction permits: Obtain any necessary building permits, which are normally required throughout a rehabilitation job. Contact your local government to find out what permits you might need.
The next step is to create a budget that fits your financial situation. Before committing to any fix and flip deal, every investor must determine how much liquid capital they have available, and the dollar amount you're willing to spend will determine if the rehab scope of work is too big or just appropriate for your budget. On your checklist, you can prioritize projects and make modifications as needed.
The fourth step is to find a contractor who is a good match for you and your project. Contractors are not all created equal. As a result, it's critical for investors to do their homework in order to pick a trustworthy and dependable contractor. Obtain at least three references from previous clients. Also, make sure that the timeline you want is one that your contractor can stick to. Check their qualifications and certificates to ensure they're qualified and insured to execute the service you're hiring them for. Inquire about each possible contractor's payment schedule to see if it corresponds to the way you intend to pay them. Finally, during your conversation, make sure to acquire a strong sense of their work ethic. Once you’ve found several contractors, the next step is to have each one submit a formal bid. This will enable investors to handpick the contractor that best fits their needs and their budget.
The fifth step is to have your permits in order. Permits are required in order to avoid breaking any local building or zoning rules. You can find out the permissions you'll need by contacting your local building department. However, in most circumstances, your contractors should be able to figure it out. Now it's time to get to work.
Step six kicks off the rehab project's demo phase. This will entail removing all trash from both inside and outside the house, as well as any tiny broken items such as doors, windows, and fixtures. The demo phase serves as a warm-up for the upcoming improvements. In the end, it will make the rehab process go more smoothly.
The external renovation phase begins with step seven. Improvements to a home's exterior, such as the front yard, driveways, railings, and other features, may usually be done without hiring a contractor. Pool care and outside painting, on the other hand, may necessitate the use of a professional service. In most circumstances, these improvements may be made at a reasonable cost, allowing investors to save money in the long run. While the cost of renovating a home's exterior varies depending on the property, it is often less expensive than renovating other areas of the house.
Investors searching for a place to start should consider the neighborhood's and area's curb appeal. Find out which plants thrive in your location and which ones require little upkeep. Minor alterations, such as switching the house numbers or mailbox, can also be made to make a subtle distinction when selling the home. In many cases, materials and tools will be the sole costs involved with these types of switches.
Step eight, the interior improvement phase, will often consume the most of an investor's restoration budget. For investors looking to get the most out of their rehab budget, the HVAC, plumbing, and electrical systems are usually the most expensive internal components of a fix and flip. DIY projects can be used to improve the appearance of a home's interior in an infinite number of ways.
Upgrades to a home's kitchen and bathroom, for example, often yield the highest return on investment.
The inspection phase is the final stage in rehabilitating a house on a budget. This entails double-checking all of the work completed throughout the renovation. Ensure that each completed project satisfies your standards and that every item on your initial scope of work checklist has been ticked off. Before putting the house on the market, smart investors would employ an expert to do a last inspection.