How to Professionally Manage Your Rehab Projects

Flipping Your Ugly House

The House Flipping Construction Process:

The success to your house flipping business is going to be directly effected by the General Contractor you choose to hire. Not all general contractors / handyman / tradesman are going to be suitable when building a house flipping business. Your house flipping business will succeed when you have successfully found or put together the right construction crew that will already be trained to work with investors or understand your flipping business system. 

Successful investors know that in order to be efficient they must have a properly trained team that can execute the scope of work in a professional timely manner and is mindful of the investors budget. Do not make the mistake of hiring the wrong contractors for your projects. The wrong contractors will only delay your project, give you headaches, cost you more money, and even worse completely discourage you.

Hiring The Right General Contractor

Here are a few tips on how we source contractors for our flips.

• BiggerPockets: search through their forums
• MLS: look at flip properties listed for sale in your area, call that listing agent and ask them if they would be interested in working with you. Explain that you're an investor, and that you're looking to partner up with a real estate agents that work with investors. Ask them to refer you to GC's that work with investors. Realtors have a great source of information that may be valuable to you.
• Craigslist: although this site may have good and bad contractors, it is a great place to start making contacts.
• HomeDepot: Go and set up a ProXtra Account and make friends with the ProDesk. These employees are a great source of information and they will be able to tell you who the most active contractors are.
• Referrals: Most good contractors know other good contractors. Always ask for referrals. Usually the framer knows an electrician, usually the electrician knows a plumber, and the plumber usually knows a tile guy etc. Work the network, you get the idea.

Another source for Licensed Contractors is going to be your state board. In California it is

https://www.cslb.ca.gov/onlineservices/checklicenseII/checklicense.aspx

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Municipality construction codes are continuously changing, therefore the construction process will also change. We highly recommend that you hire licensed contractors for your projects.

Strictly speaking about construction, it’s important to start with the end in mind. Get a clear picture of what you want your flip to look like, whether its with a render, photos of similar houses. Anything to give the contractors a visual. Develop a scope of work to achieve that vision. 

Usually, with our fix and flip projects, the scope of work is detailed from the "Top Down", and from the exterior to the interior. Outline and take good notes when you are walking the property with your contractor. Give a detailed list of the items that you would like to repair or replace. Be as detailed as you can with your contractor to ensure proper communication and proper project management. This will avoid change orders and miscommunications.

HOME INSPECTION REPORT: _{A thorough home inspection can reveal critical information about the condition of a home and its systems. This makes the buyer aware of what costs, repairs and maintenance the home may require immediately.}

During your due diligence period, you should have inspected the home by a professional home inspector. Now is the time to review the report with your contractor to start to identify the repairs necessary and begin to create your scope of work. 

1. To determine the scope of work of all exterior items, take notes of all items that are either rotted out, broken, cracked, not functional, or unrepairable. Roof, windows, stucco/siding, exterior groundwork (landscape, driveway, etc)

2. Walk the interior of the house and determine the condition of all interior items. Take note of all items that are either extremely dated or in unrepairable condition. Drywall, light fixtures, appliances, cabinets, etc. If you need to reconfigure the bathroom, or closet space etc. this is the time to consider including that in your scope of work.

This is what will become known as your scope of work. And this is where your contractors will begin to create their bids and estimates. Your job is to gather all your bids and estimates as quickly as possible, and make sure you know exactly how much money you are going to need flip this house, keep in ind you will always need to have an additional amount of money set aside to cover unforeseen expenses. 

Pro Tip: it's always good to understand that it is difficult to know EXACTLY what your end construction cost will be. That is why we recommend that you pad your estimate by at least 10%.

Now that you have determined what need fixed or replaced, have your contractors bid out the scope of work. Make sure that both the scope of work and estimate are detailed and are in writing. 

If you are going to take on the construction without a General Contractor, just know you will be responsible for pulling the required permits. Not everything will require a permit, so if you are not sure, schedule an appointment and talk to your city's building department.

You will need the following items to pull your permit:

1. Scope of work 
2. Proof of Ownership
3. Building Permit Application (located on local municipality website) Electrical, Plumbing, Mechanical, and Building Permit applications completed. (see attached example of permit)
4. A site plan, or full set of plans if required. You can contact a local engineer to provide you with a site plan. Provide the engineer with the scope of work so they can effectively communicate that on the plans you will be submitting. (see attached example of plans)
5. Payment for city to process. Cost of permits will depend on your scope of work.
6. Necessary insurance 

We’ve developed a 3 phase system to make sure we are on track with our flips.

Phase 1

Demo / Clean out / Planing

This usually consist of one week’s worth of work. Take a look at your design and scope of work to determine what you want demoed, salvaged, or saved. After the house has been demo’d and cleaned, bring the engineer and cabinet crew. Early planing is critical. Effectively planning your construction will minimize change orders and delays; both of which can become very costly, very quickly. 

The cabinet crew will develop a layout for the kitchen and bathrooms, and the engineer will plan out the layout of the property. The plans and cabinet layout will predetermine the location of your plumbing, and electrical work. Your plumber, electrician, framer, and everyone will need to have a copy of the layout before they get started on their work. 

 

Phase 2

Rough work/ exterior work

Rough work is the construction term generally considered to be any work being done behind the drywall. The rough work process should also take about 1-2 weeks. Round up your contractors, and walk through the house and plans with them. 

The general order of rough work is as follows 

• Digging, trenching, concrete, foundation (ground work)
• plumbing or running any electrical lines underground if necessary.
• Framing
• Electrical / plumbing / mechanical

The end of Phase 2 will be hanging drywall, mudding, texturing and painting. 

 

Phase 3

Finish work

The finish work is everything after the house has been drywalled, textured, and painted. Usually, this is when the cabinets, countertops, ceiling fans, etc are installed. This is where we pay the closest attention to detail. Every screw, every door, every doorknob is checked to make sure it is up to your standards. This process usually takes 1-2 weeks. We make it a standard to be in the flip once or twice a day during the last two weeks, to make sure nothing is missed. 

 

Use the provided check list attached to this course to ensure your final product is as best as you can get it.