Basic Repair Strategy

Tony D.

Estimating repairs isn't as difficult as you might think. Once you Rehab two or three houses, you'll become very comfortable estimating your repair costs. This is where a check list becomes invaluable.

As you do more rehab projects you’ll figure out exactly what you want and need on your checklist. There are plenty of inexpensive estimating programs out there to help you get started.

Caution: If you’re just getting started, don't fool around with houses that have major structural problems. Primarily, this means foundation problems. Cut your teeth on houses in need of cosmetic repairs or minor updating only. You'll save yourself a lot of grief. Once you become confident in your abilities, you may want to take on a bigger challenge but go slow and be careful!

Your goal should be to give your house an advantage over the other properties for sale in the neighborhood. The best way to do this without breaking the bank is to only do the repairs which are necessary to the sale. Far too many investors, myself included, have gone way overboard on repairs. The mindset is that we would have the best, most beautiful house in the neighborhood and so it would sell itself. That is not always the case. Your house doesn't need to be the most stunning house in the area, it just needs to be better than most. If you over spend you may end up pricing out a large segment of potential buyers.

If there are a lot of rehabbers in your area and every other house on the market then that is what you may need to do to compete for buyers. However if most of the homes are being sold by owner occupants that have lived in them for years they are doing little more than cleaning and painting (if that). If that is the case fresh paint, new carpet, some updated fixtures, good curb appeal and some appropriate staging should be enough.

For example:

If you and your family wanted to buy a house in a good area what would you choose, a house with rotted wood siding and peeling paint or one with new vinyl siding?  Would you be more likely to choose the house with the brand new roof or the one with dips and missing shingles? A house with new carpet or one with older stained carpet?  A house with a well landscaped front yard or a house with the same old, same old?

What about new ceiling fans, light fixtures, appliances or counter tops? How about new tile in the kitchen versus old dingy vinyl? Would you choose the updated, modern bath over the 19060's style with green tile? Central Air or window unit? A fresh new, contemporary look or something that looks like your Grandparents live there?

If everything in the neighborhood is offering buyers the same choices then you should offer them something a little different. Just fight the urge to install, hardwood floors, granite counter tops, stainless steel appliances and cobble stone driveways in a neighborhood full of homes with wall to wall carpet, paneling, window units and gravel driveways.

So, where should you start?

I always start with the first thing perspective buyers see…the exterior!

Curb appeal is what gets the buyer interested in the home in the first place? Most buyers will judge the book by the cover when it comes to buying a house.  That’s right, your potential buyers are out there driving the neighborhood looking for that special property that makes them want to get out of the car. So let's start on the outside of the house first.

If the house needs a new roof, add this first. If not make sure to have the roof professionally cleaned. Stained shingles are a big turn off. Buyers will think the roof is old even if it's not. Follow this up by replacing the old outdated windows with some attractive replacement windows. This is not as expensive as you might think and it goes a long way in the sale of the house. Put up some new siding and shutters. Just by adding a few shutters to the front of a house makes a dramatic difference in its appearance.

What about a new entry door? The front door should complement the shutters, siding and trim work. Paint the home with an attractive color scheme. Don’t forget to add the house numbers new exterior light fixtures and new mailbox. Elegant fixtures can be added for very little extra cost. Be sure to keep the yard and work area clean. Mow the entire yard then do some extra landscaping in the front.

Now we have an attractive, easy to market house and we're not even half way through with our repairs. People will begin to stop by and look at the house. And by people I mean Buyers! If the house has good curb appeal people are going to want to buy it. If you have done a good job with the exterior up to this point this is when you'll begin to find Qualified Buyers. I have had many homes sold before we even started the interior. Buyers love the opportunity to pick their own colors and fixtures. This is a good marketing tool while working on the house.

Now that the exterior is finished let’s move inside. You always want to add central heat and air if the property does not already have it, redo the ceilings, update the kitchen and baths, repair sheetrock and paint (I suggest removing old paneling instead of painting over it), hang ceiling fans and new light fixtures, replace all door hardware, (replace the interior doors completely if they look old and dated.) and install new carpet and vinyl flooring. I guarantee you that the other sellers in the neighborhood will not do this (unless they are investors). Most sellers don't want to spend money when selling their home because they are too busy thinking about how much they are going to be spending when they buy a new home.

The idea is to make the property look new. Give it a leg up over the competition and make it feel like a home. When people are attracted by the outside, don't disappoint them with the inside.

The best thing about working from the outside in is that you are attracting Buyers while your contractor is on-site everyday and so it is open for your potential buyers. It is also a good idea to have marketing materials at the property that the contractors can give to any potential buyers that stop. Whether you want them to or not people will stop by to see the progress to make sure you are ready for them.

Unless you are going to be doing the repairs yourself, you'll need to find Subcontractors you can do business with. Make sure you use licensed contractors. If you don’t, you may run into some serious problems with permits, inspections, improper repairs, etc. There are plenty of Handymen out there that can “make things work” but those repairs may not be done correctly. This can cause problems when your prospective buyer gets their own inspections done. You could lose your buyer or even worse, the repairs could be a danger to your buyer and open you up to a law suit.

You can find good contractors by looking in the classified section of the newspaper. They generally have their own special section. The Yellow pages and online is another place to look.

However, the best way to find good, reliable people is by word of mouth. Find out who others are using. Ask the Subcontractors you like doing business with if they can recommend a good painter or electrician or whatever you need. Join your local REIA (Real Estate Investors Association) and ask for referrals there.

Get the subs to give you bids on your project. To protect yourself, always get more than one bid. Pretty soon you will be able to estimate these figures without bids. You'll begin to learn how much it costs, on average, to replace a roof or install central heat and air or paint a house inside and out. It's really not difficult. Once you find good Subs, you'll stay with them for a long time.

Now you should be beginning to see how your Repair Strategy is just as important as your purchase strategy? Your purchase Strategy and Repair Strategy should be combined with an aggressive Marketing Strategy to truly go after that sale! Everyone knows you make your money when you buy but what most don’t know is that you can easily lose that money when you rehab. A rehab project done right can almost sell itself. Do it wrong and you will go broke in cost overages, holding costs and eventually a low sales price.