Incidental But Important Rehab Cost For Investors



I’ve previously written about how to estimate the rehab of a house. But there are other costs beyond the repairs and upgrades. You need to account for the permits for each phase of the project. You’ll need permits to install a new furnace or electrical panel or roof. These can add up so be sure to include them in your estimate as well as the time it takes to get them issued. After all, time is money.

Other costs to account for during the rehab are utilities and insurance. Insurance for a non-owner occupied house can be spendy. You’ll need to shop around for good coverage at a reasonable cost.

 

© Wilm Ihlenfeld - Fotolia.com

© Wilm Ihlenfeld – Fotolia.com

 

The Punch List

Even a brand new house has imperfections when it’s first completed and a rehab is no different. When all the tradesmen are done and gone, there are still a few important things that need to be taken care of.

The industry calls this a punch list. You want to have a quality punch list contractor come in and make sure everything is completed properly and working correctly.

To get that WOW factor, the house needs a deep cleaning after having been partially demolished and rebuilt. Schedule a professional cleaning service to do the job.

Now that you have a good idea how to accurately estimate a rehab, the next important information you need is staying current with the costs. One way to do this is by keeping careful track of the costs during the rehab and comparing them to the estimates. That way, you can make adjustments to the next rehab you estimate.

After the Rehab is Complete

One last thought about rehab costs. Save every single receipt. Not just for tax purposes but for when it comes to selling the house. Certain federal loan programs have checks and balances in them to prevent consumers from unscrupulous flip scam artists. Because the selling price of the house will go up significantly in a short period of time, you can expect to have to prove the value of the improvements that were made. This is best done with a combination of before and after pictures along with the receipts. Pictures taken right after demolition are often the best.

After the rehab is complete, you still have the expense of marketing the house. Maybe you use a realtor to market the house or maybe you do your own marketing. Either way, it costs you more money. With a realtor, it’s the sales commission. You’ll get more exposure and might sell it quicker but it will cut into your profit more than if you market it yourself.

Besides the obvious craigslist advertising, I’m a big fan of bandit signs for marketing houses without a realtor. You can buy these for about a dollar a piece and handwrite on them. Put a bandit sign inside several front windows so these can’t be blown or kicked down. Put a couple more in the front yard and a few more at busy entrances to the housing division. If you can state that you offer owner financing, you’ll have no trouble making a quick sale with self-marketing in today’s market.

PhotoAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.