Rehabbing Investment Property 101 - The Construction Process
New investors can be overwhelmed by the size of a rehab project, especially if you have never completed one. Television shows, people you know and books you read may oversimplify this process and leave out important details. This article will explain the process in detail taking out some of the fear and nervousness about rehabbing your investment property. 

You can get started by looking for “fixer-uppers” by yourself or with your realtor in your local community and wholesalers. As you walk around and through the property you should begin to evaluate and take notes about the scope of work necessary to bring the home to acceptable living conditions. After you have compiled your scope of work for the property you should do an evaluation with your contractor, showing them what your ideas are for any lay out changes such as removal of walls, adding bathrooms, etc. The main items to concentrate on in your evaluation are to fully inspect the main systems of the house and the structure. Check the foundation, the roof, all plumbing systems, electrical systems and HVAC for operation. Utilize the contractor’s construction knowledge on things that you may not know how to approach. Contactor’s do home rehabilitations for a living so do not be afraid to ask for their opinions regarding the scope of work or ways to save money on the job. 

When your walk through with the contractor is complete they will provide you with a bid for the scope of work that has been agreed upon. Review this with the contractor asking any questions that you may have about the bid. After review of the bid the next step is to develop a draw schedule from which the contractor will be paid. EDC conducts weekly draw inspections on Wednesday and approved draw funds are advanced to our clients every Friday by 3pm. Funds are advanced as work is completed by the contractor, not before work is complete. This is done to ensure that your contractor completes the work in a timely and acceptable manner as agreed upon in the contractor’s bid.

The First Items to Address 

When doing a home rehab the first thing to complete is the demo work like cleaning out all trash and debris, removing old kitchen cabinets, removing walls & ripping out carpet. Doing this first provides the contactor room to work and makes the rehab easier because there is room to operate inside the property. In most cases you will need to have a dumpster on site for all items removed from the property. Keeping a clean jobsite will definitely improve the quality of work the contractors perform and the time it takes to complete the work. People differ on what area of construction to begin with but my experience tells me working on the exterior of the house first is the wisest place to start. The sooner that you complete the exterior the sooner that you will start to receive inquiries on your for sale or for rent sign. Pay particular attention to the curb appeal of the property to attract more buyers or renters. Any and all roof repair should be completed before all else because if the roof has any leaks the inside of the house can be damaged further or even ruined. After roof repair or replacement other exterior work such as siding, replacing or wrapping windows, exterior painting can begin. The last reason to begin your exterior work as soon as possible is to not get caught with a string of bad weather preventing any exterior work and causing you to extend your loan longer than necessary. Naturally any good contractor will be working on the interior simultaneously to complete the job quicker. Interior work should always be completed in an orderly manner in order to prevent confusion and extra cost. Plumbing pipes and duct work for HVAC systems cannot be maneuvered around objects such as wiring therefore these items should be completed before any electrical wiring is accomplished. Once all of the plumbing, HVAC and electrical systems are installed you will need to get inspections from the local municipality. Once the inspections have been approved you are ready to install your insulation in the walls before installing your sheetrock. Before installing any sheetrock if you do not get an inspection for whatever reason, make absolutely sure you test your water and sewer lines for leaks prior to closing in the walls. 

It is important to have a working heating and cooling system in the home near the beginning of the project so that interior work can begin, particularly finishing and painting the sheetrock if you live in a colder climate area where temperatures are a factor in drying of materials. While the plumber is working I’ll have an HVAC crew installing a new system consisting of a new gas furnace and a central air conditioning. If an HVAC system is fairly new I will avoid replacing the system and simply have a system check done to ensure that all parts are in working order. However, I strongly suggest the outside unit not be set until work on the project is nearly complete. This will protect your investment from being looted or destroyed. 

After exterior work is under way along with the plumbing and HVAC work, electrical issues are the next items that I address. Most investment property that you will purchase will need, at minimum, minor electrical work. Some will require a deeper scope of electrical work such as rewiring the entire property or updating the electrical panel to higher amperage. In many cases there are only minor electrical issues to address such as switching outlets and covers and adding GFI’s. If you are adding an HVAC system to a property that has never had one the electrical panel may need updated to handle the extra work load. Your contractor can explain this to you in detail.

Now The Ball Is Rolling… 

After completing the demo, exterior and major systems work I address any layout changes. If we removed walls during the demo stage usually there will be some faming work to be completed to open up the new space. If any plumbing, HVAC or electrical was affected by this it would have to be addressed in the above “beginning stages.”
Next I begin the drywall work that is necessary. Sometimes a property will need new drywall throughout the entire house, although that is rare. It is usually contained to only a few rooms because of previous water damage or layout changes. In cases were we are replacing drywall we usually do the entire room to ensure that no spots are missed. The best case scenario is when you can simply touch up the walls with plaster or fill in holes.
When all of the drywall is complete we begin painting the walls. First we apply a coat of primer or a light coat of paint throughout and then bring in a drywall crew to fix any flaws in the walls, such as waves or imperfections. After all of the flaws have been addressed and repaired two coats of paint are applied throughout. 

After paint has been applied and is complete you want to address your floors except for carpeting. We usually start in the kitchens and baths and do so before installing any items, such as fixtures in the bath and cabinets in the kitchen. I always try to do ceramic tile in the kitchen and if the budget permits, in the bathrooms also. If ceramic tile does not fit into the budget vinyl will do in the bathrooms. You can take your kitchen dimensions to Lowes or The Home Depot and they will design your kitchen layout for free. This will guarantee that you get the correct size cabinets and will make your contractors life much easier! Make sure to note on your dimensions, where the openings, windows and doors are located in the room.

The Final Steps… 

When the kitchen and bathrooms are complete you will want to begin your “punch list.” The punch list constitutes the last 10% of the work to be complete and includes replacing items such as outlets, switch-plates, light fixtures and door hardware just to name a few. 

The last thing that should be done for a rehab project, in 99.9% of the cases, is putting in the carpeting. This is done last because carpet can be ruined by construction workers going in and out of the house, paint or plaster being applied to walls, or any number of things being done in the house. It doesn’t make much sense to put carpet in during the first few stages of work and have to clean or replace it at the end of the job.
Finishing up the job… 

You will now begin the clean up stage of the job ensuring the house is clean, smells good and has some sort of decoration such as blinds, fans and fixtures will make the property appealing and ready to show to prospective buyers. Landscaping the front of the house can be completed in this stage to provide further cub appeal. I usually do not show my houses until they are totally completed both inside and out. I do not want to take prospective buyers through the house if they can’t envision what the finished product will look like. Showing the house before the work is complete will most certainly lose you a potential buyer. 

By taking these steps during your construction you can insure yourself of a much smoother experience in working on your fixer upper property. These steps will also save you money in the long run and shorten the time it takes to complete the work. Overall the process is simple while using reputable contractors and following simple procedures. Happy investing to all!

By Scott Hastings, EDC Pittsburgh Territory Director
 
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