Managing Rehabs at Scale
As we've shared previously, we started our Real Estate Investing Journey via a househack in California and, shortly thereafter, a TurnKey property in Indianapolis. Neither of these properties required rehab at the time of acquisition (though both did shortly thereafter), and our initial exposure to rehab was primarily through tenant turnover. As we've grown our business and built trust with our team, we've developed increasing confidence in our ability to purchase "ugly house" with severely deferred maintenance. In fact - those are really the only homes we look to purchase at this stage, as they present the best opportunity for us to add value as investors.
At any given time, we're now likely to have several major rehabs underway, as well as smaller rental turns. Accordingly, we've had to develop and refine clear systems for managing projects - ensuring they stack on-track, on-time, and aligned with our vision. When managing only a single rehab at a time - these systems might feel unnecessary - but we'd encourage you to perfect them while scale is manageable. Mistakes will be less costly at this stage as you refine your checklists, and you'll build confidence in your ability to take on more ambitious projects overtime.
With that - here is our system! We hope you find it valuable, and can leverage it in building out your own!
📝 Checklist: Managing Rehabs
Day One: Protect Your Asset
✅ Change the Locks: As soon as we close on a property, or have a change in tenancy, we change the locks! We never recycle locks - for the safety of our future residents and our property.
✅ Set up a Security System: We put a Simplisafe system in vacant properties, after having learned this lesson the hard way.
Week One: Project Infrastructure
✅ Kick off a Project: We use Monday.com for Project Management with our team, and as soon as (if not before) we close on a property (or have a tenant vacate), we kick off a rehab project for that particular property outlining actions / timelines / and roles and responsibilities.
✅Set Up a Page: We use Notion to track (visually) the progress of rehabs, and to share the progress with any partners on a deal. We set up a page with initial property photos and rehab status, and share the private link with our lenders/partners - updating it each week with new videos and photos from our team.
✅ SOW & Timing: In the case of a new acquisition, SOW & Timing are sorted out with our contractor well ahead of closing (as this informs our offer). In the case of a turn, we're likely working on a Scope & Project Timing with the team as soon as the tenant vacates. When we receive the scope, we're auditing to ensure:
The scope includes all expected / necessary repairs (acquisition & turns)
The scope includes any major inspection findings (acquisition)
The scope will bring the property up to our intended ARV (ie; if we're aiming for a high-end flip, scope should include higher-end materials)
✅ Contractor Payment: We don't typically pay for anything but work completed with our contractors - but we do extensive work with parties who know and trust us. We are always willing to provide a down payment for materials where necessary, and we set a payment schedule for work completed. No matter your experience level, you should not pay for any uncompleted work up front. If working with a new partner for the first time - it's worth paying a vendor for the cost of materials, vs. paying the contractor directly.
Duration of Rehab: Regular Updates
✅ Twice-Weekly Photo Updates: While we're local and (in theory) could drive to rehabs to see the progress - that would not be a scalable approach. Instead, we expect regular updates from our contractors, with photos every couple of days. This enables us to see how work is progressing, and ensure we pay only for work that is fully completed.
✅ Weekly Progress Updates: Weekly, we ask our contractor to send us video walk throughs so we can see how the entire project is progressing. We also ask for updates regarding budget (ensuring we're on-track, or know early if the scope needs to expand) and timing.
Completion of Rehab: Check It Twice
✅ Refinance Preparation: Once we know we're about a week out, we'll reach out to our bank (if we plan to refinance) to have the appraiser walk before we move a tenant into the property. This ensures the appraiser can see the full extent of our improvements, without disrupting a newly moved-in resident.
✅ Update Our Partners: If we're working with a private lender or partner, we'll touch base regarding the next project(s) we have coming up, should they want to redeploy their capital.
✅ Reverify CMA's and Rent-Rates: Depending on our strategy, we may be listing the property for sale or for rent. Months may have passed since we last ran numbers, and we want to ensure our data is current - so we'll ask our agent to refresh the CMA and rental rates.
✅ Third-Party Walk Through: On a minor rehab, we'll ask our property manager to walk the SOW prior to our final payment. No matter how awesome the contractor, our PM will always come back with a punch-list - and this helps us ensure a great tenant move-in. On more significant scopes, we'll ask (and pay) our inspector to walk it for us.
✅ Pay the Contractor: Enough said! Pay for completed work, on-time and in full!
✅ Log the Warranties: We scan and log all warranties in our property database (appliances, roofing, siding).
✅ Listing Photos: Once the punch-list is complete, our PM will return for listing photos.
✅ Autopay: An easy one to miss - but if you're working with a bank on the mortgage, you'll want to set up autopay! One less thing to remember. 😉
✅ Document the Learnings & Onto the Next: With each rehab, we learn something - and we try hard not to learn the same lessons twice!
