Good Answer: Completing a Renovation with Speed
Property manager at Sundae, Jacob Albaugh, offers insights into how investors can conduct a renovation for maximum profit.
Jacob Albaugh has been a property manager at Sundae for about three years with plenty of renovation experience. In that time has seen plenty of what works for investors in real estate. The Los Angeles based real estate professional was previously CEO of RAC Contractors Inc. out of West Covina.
His experience in home renovation in the competitive Southern California real estate market. This has given him solid insight into how to keep a renovation on budget and on time, no matter the strategy. Whether flipping houses, buying and holding as rentals, or another exit strategy, he has a strong foundation in real estate. He also knows a thing or two about how to decide what type of renovation is appropriate for a property in a given area.
Here are a few of his insights on rehabbing investment properties quickly and economically.
How do you comp a property and decide how to renovate?
When you’re comping a house to rehab, you’re evaluating how far you should take the rehab. Generally, when investors comp a property, they’re looking at three to five homes that sold within the past six months nearby. The homes you select as comps should have similar features as your home such as square footage, home age, number of bedrooms, architectural style, and property size.
Standard vs. high-end
When Albaugh does comps for a rehab property, he pays special attention to the types of finishes in the homes he’s comparing. “If most of the comps are pretty standard and they’re still getting top dollar, we’re going to keep our rehab pretty standard,” explained Albaugh. “If we see that there’s another house that’s fully rehabbed and has high-end finishes or just completely remodeled the house, then that’s the route we’re going to take.”
Return on investment
You also want to keep an eye on your ROI, or return on investment. Some updates will put you in competition with nearby properties and others won’t mean a thing. You’ll want to make sure your proposed updates are within your home renovation budget, too. And don’t forget to include an outdoor facelift as part of your plan.
What would you recommend before starting construction?
Multiple bids, always
Never rely on just one contractor bid. Albaugh recommends getting multiple contractors out to the property so you’ve got a range of quotes. And while he says he often prefers the cheapest one, it’s not always the best choice. You’ll want to consider each bid and bidder carefully.
Choosing your contractor
It’s not always easy to find a good licensed contractor. However, the legwork done on the front end will help to ensure your renovation goes as smoothly as possible. This includes asking trusted friends and colleagues for recommendations and thoroughly vetting anyone you’re considering doing business with. You’ll also want to match personality and strengths. If timeliness is your main priority, then you may not want to hire the contractor that’s a self-proclaimed perfectionist.
Detailed scope of work
It’s generally to your advantage to have a thorough, detailed scope of work to hand each contractor before they get to work on the bids. “Having a great scope of work that you can hand the contractors is key so that you can compare apples to apples when looking at bids,” says Albaugh.
How valuable is time while doing a renovation?
The importance of scheduling
When you’re a real estate investor who’s looking to get work done on a property for a quick turnaround, timing really is everything, said Albaugh. That’s because each part of the renovation generally hinges on the piece right before it. After all, you can’t drywall until the new plumbing is in. “If one schedule gets delayed, it changes the schedule for everything else — and, of course, that costs money,” says Albaugh. “It’s very important to try to keep a schedule.”
Why is it important to sequence subcontractors on a rehab project?
Once you’ve realized that any delay in time also increases your costs, it becomes clear that timelines matter. You’ll be motivated to make sure all your subcontractors know exactly when they need to have materials ready and show up and work. For Albaugh, one solution to keeping everyone on task is a master calendar, which he likes to share with everyone that’s working on the job. Timeliness will help you stay on budget, too.
Of course, your calendar needs to have some room for flexibility. “Things happen. Contractors can’t make it one day,” and you need to be able to work with that, Albaugh stated. When things get backed up, “communication is huge to make sure you’re relaying that back to all your other contractors to make any adjustments that they may need to make if someone doesn’t make it.”
How do you keep to your timeline?
Consistency works for Albaugh when he’s running a renovation project. “I always have a timeline of six weeks,” he emphasized. A lot of people take a renovation budget and figure for every thousand dollars, you’re looking at about a day of work. He elaborated by saying “and that’s a great timeline.”
Success amidst change
With construction there’s always a caveat, in this case it’s that “every job is different.” The dance among timeline and budget and the individual project isn’t always straightforward. Still with a clear plan, trusted contractors, and communication on important aspects of the project, such as time and budget, you’re setting your renovation up for success.
Sundae gives investors a jumpstart on the renovation process and exit strategy by providing tons of helpful, clear information on each property. You can expect details such as interior and exterior property photos, 3D tours, floor plans, disclosures, home inspection reports, and title reports in most listings. With each piece of information, you’ll be able to better evaluate properties that meet your criteria with ease. Plus, the ability to use custom filters to tailor searches by property details, location, and more will make it easy to find the right investment property for you.
Whatever your exit strategy, it’s time to streamline your leads. There’s no marketing required with Sundae’s Marketplace. Join and take advantage of a one-stop-shop for off-market deals across the country. With a constant flow of leads, you’ll be able to save time and work on other areas of your business.