Rehabbing

[TxFarmer]

Quick question about rehabbing for the experienced.

How do you usually do your rehabs, use one remodel guy, sub it out yourself, or do it yourself?

[propertymanager]

I do all the rehab work myself and I've rehabbed dozens of rentals in the past 3+ years.  Being a farmer, you should have some spare time in the off season.  I have found that I can do a better job and get it done faster than a contractor with a crew or several laborers....AND THERE ARE FEWER HEADACHES.  If I have to be there once or twice each day to supervise the contractor, it is easier, cheaper, and faster for me to just do it myself.

Mike 

 

[lassitermortgage]

Ugh - it would be disastrous if I tried to do anything myself. Plus my time is way more valuable and better spent on deals.

I have a property manager/rehabber that acts as my GC. I lay out the project, he gives me a bid, we argue, then he does the work for the amount we have agreed upon. He has a crew of guys that he calls in and he has all the contacts for materials, etc.

[reslynn]

I hire handy man folks for the jobs I know that I can't do.  Doing it for yourself could save you money but you could also end up losing some of your own valuable time by doing it yourself.  If you have more properties you need to invest or manage, you probably saving a lot more money by hiring the right person.

Hiring the right person for the right job also ensures that the work is professionally done.  It will take some time and good networking to know who are the reliable workers that you could trust over the course of your real estate investing venture.

[Bluemoon06]

I have done the work myself, I have hired contractors and I have hired subs for each craft.  I find that my time is too valuable to do the rehabs myself.  I end up having to go out of town or take my kid to a game etc.  When a contractor does the job, he forgets that it is my project not his.  When he gets into it, he inevitably finds a different way to do the job and want to do that.  The change is ALWAYS to make the job go faster or make his life easier and NEVER to give me a better product.  For example, I told the contractor to take the wall paper down and then repair any drywall damage that this may cause, texture and paint.  I came in later that day and they were painting.  I asked how they got the wall paper off so fast, and he said that since the wall paper was on too tight so he decided to just texture over the wallpaper and paint.  It looked good but when the wall paper starts to come off I will have to do that same job using my own money.  It made his life easier but put a time bomb in the house that I don’t need.  The price we agreed on was higher than a regular paint job because of the wall paper removal so he didn’t save me a thing but just added one more thing to my list to watch for.  So I spent a lot of time watching what he was doing.  Subbing out to each craft has been the best for me.  It takes more time than using a contractor, but not nearly as much as doing it myself.  Since I get the money for the rehab in the purchase, it becomes the difference between saving some money and being just plain greedy.

[TxFarmer]

Bluemoon06, how do you structure your deals in order to get the rehab money in your purchase?

[BobbiOh]

We do a lot of it ourselves. (DH is the son of a GC) We sub out the things we can't do or that time wise costs us more to do it ourselves.

[Frank Chin]

I done it all different ways, myself, handyman, and licensed contractors.

What it boils down to is how quickly the job can be done. I do a good job, but I'm too slow.

As an example, when someone moves from a 2BR apartment, a painter I often used can do it in one day for $450.00. A regular painter would take "two man days" and charge me $850.00 to $1,000.00.

I do it myself in 5 days, including minor repairs, spackling, but it'll be over two weekends as I have a business. The paint costs me $150.00.

Which means that if someone moved the end of February, I won't be done till mid March, not renting it out till April 1.

On the other hand, I often try to arrange move-out the weekend before if possible, painted as of the 1st if possible, or by the first weekend. I find an apartment fixed, painted, and carpets cleaned (or new) would go in a snap, and I would have it rented out before the middle of the month, and even a few times by the first. . At $1,400/month rent, my painting the apartment myself does not save me any money.

Once, I had someone looking at an apartment I had for rent, then a few months later, came back to see another one I had, and nine months later, a third. He explained that he really wanted to rent a place down the street from him, but the owner insisted on rehabbing an apartment all by himself. It was already taking nine months!!

At the time, apartments were going for $1,200/month, and gutting and rehabbing an apartment takes no more than $10,000 and up, no more than $13,000, including materials, and I can't understand why someone would give up almost $10,000 in rent to save no more than $7,000 in labor, unless he considers rehabbing a hobby.

 

[DannyTheGreat]

It's always contractors or handymen for me. The jobs are managed by a project manager, a general contractor, or the handyman crew chief. If you can't be profitable without hiring out the work, you will be recieving a very menial wage for the menial work. I don't do the work on rehabs for the same reason I don't vacuum the floors in my office, because I could be paying someone else while I do something of a higher paid job.

Cleaner- $12/ hr.
Receptionist- $14/ hr.
Contractor- $22/ hr.
Investment Analyst- $38/ hr.
Acquisition Director- $40/ hr.
General Manager- $45/ hr.
King of the World- Priceless

If I decided to vacuum carpet, answer phones or pound in nails, I would be going without the opportunity for a higher paid role in the company. The lower the work you are performing is on the income totem pole, the less opportunity for bigger money. You've got to replace yourself for the lower paid jobs so you can focus on the higher paid ones, which will grow the company faster than anything. When your killing your knees laying down carpeting or hardwood floors, your not looking for deals. If you hire someone to kill their knees, your company will make more money as it now has a full-time Acquistion Director.

Then when the time comes, you hire out an Acquisition Director so you can be the General Manager. Then when the time comes, you hire a General Manager so you can be the King or Queen of the World.

[Bluemoon06]

DannyTheGreat  is right.  My mentor likes to joke about the fact that he does not have any business cards.  He has no business cards because he has no job.  He says that the difference between being a business owner and being self employed is a business owner fills no spot in the org chart.  So all you guys out there that think they own a business are really just self employed.

[BobbiOh]

Part of the reason that we do most of the work ourselves is that contractors in our area are pretty unreliable. The real estate market here in San Diego has been crazy for the last few years and contractors had a plethora of jobs. They frequently wouldn't show up, or they'd do half the job and disappear. (We have an acquaintance who runs his business this way) Trusting a GC to run the job would actually cost us more money in holding costs when jobs runs over schedule. At this point it's actually more cost effective for us to do the work ourselves and contract out the things that we can't do.

If you're doing a lot of deals you can build a good relationship with a GC (we only do 2 or 3 per year). The climate here in San Diego has slowed down a great deal and contractors are starting to actually go looking for jobs, so I suspect that reliability will improve.

[DannyTheGreat]

Choosing and managing contractors is a fine art. Any new contractors I use are under a microscope until they prove to be reliable, fast, and cost effective. A first time hire means I'll have atleast 2 proven ones on standby ready to step in and replace the current one. The first job is always a try out and any screw ups will not be tolerated. I expect a below average price and an above average turnaround from a new contractor. With every successful job they get more slack on the leash and some really good ones I will still hire even if they gouge me on the price once in a while, keeps the morale up versus being a slave driver. Constantly giving and taking on the price keeps everyone honest and happy. Keeping a close eye on them while dilligently controlling the money as a motivator on top of following up on several referrals before hand is usually enough to keep them in-line.

Which contractor gets hired also depends on the project manager. I don't match up new contractors with new project managers. I don't match up busy project managers with busy contractors. Only having a little supervision means the contractor will inevitably spend more time elsewhere on other projects. Project managment is a job, no way around it. If you hire contractors with hopes of being free of work and worry, it will end in disaster. Delegating the work doesn't let you off the hook. You have to make everyone accountable for their performance by being on top of everything, all the time.

[BobbiOh]

We both still work fulltime. Eventually we'll go fulltime and we'll each act as project managers.

We've actually put some pretty strict conditions into our contracts with our contractors and it's worked to some extent. We put a job deadline into the contract and penalize them for going over that date. We also have a clause that says that if they fail to show up without prior notice twice, they're fired and money that they're due for work they've done is forfeited.

I hate to say it, but a lot of the problems that we've had with contractors is because I'm a woman. With a few it was quite clear that they didn't like having to answer to me instead of my husband. We have found a guy that we like now. He and I have learned to trust each other. Unfortunately, he's a floor guy and not a general handyman.

[DannyTheGreat]

I hate to say it, but a lot of the problems that we've had with contractors is because I'm a woman.

This is all too common. The younger or more attractive, the worse it is. I've fired many contractors for harassing or not respecting my female project managers. I like to be the one to drop the hammer when this kind of thing happens just so nothing is said in the confrontation by the contractor to make the PM rethink their chosen profession. I do have one that routinely makes $15k/ month by managing multiple projects and she does a great job at wrangling the animals. Beside the fact that I just hate them, this is one of the main reasons I check the sex offender registry before hiring new contractors. It's an unfortunate reality of most male-dominated workplaces.

[Rich_in_CT]

I hate to say it, but a lot of the problems that we've had with contractors is because I'm a woman. With a few it was quite clear that they didn't like having to answer to me instead of my husband.

I'd tell them to suck it up and not forget who signs their check.  If they have a problem listening to women they can go home and hash it out with their wife.   Here is you holding their check ->