Sequencing A Remodel

Dated: 03/23/2017

Views: 554

    Purchasing an investment property could potentially yield a great return, however like any home purchase, it could be a financial risk if material costs and labor variations aren't configured correctly. Some investors seek a potential return of upwards of 30% to consider a remodel flip an option, however many remodeling companies are comfortable with a much smaller margin of around 10-12% or less. Whatever the expected return, there are additional factors besides equity and end value to consider in cost. 

    As a former Project Manager for a REIT (real estate investment trust) and large remodeling contracting firm specializing in remodels, understanding the model and efficiency of a timeline is a major factor of turning a profit. Surprises during construction, permitting restrictions, inspection failures and of course contractor delays, are all common problems often overlooked or under managed during a remodel. Improper or lack of inspections too often cause unknown issues to arise during construction without notice. Most successful remodeling companies or individual flippers can maximize profit and decrease the time of a remodel by professionally sequencing each and every phase of the project in advance. 

    While there are many software programs and structured outlines available for remodeling contractors, a basic spreadsheet and understanding of the scope of the remodel is a completely satisfactory option. Sequencing phases of construction from beginning to end, and often overlapping sub-contractors schedules is the most efficient way to speed up the project on time and on budget.  

    A good generic strategy often includes a PTL (property turn-around list) which is a complete itemized scope of the project outlined room by room and specific to include all items with a dollar amount per item. Next is a structured well thought out material specification list to include available SKUs and in stock readily available items at local suppliers. Once production starts, it's important to remove debris, and check for safety issues and remedy such problems before construction.  

    Once the actual contracting phase begins, a professional project manager or construction supervisor is often hired to manage and adhere to timelines, schedule inspections for permitted items and sequence crews to overlap each other on site. Too often individual home flippers don't sequence trade schedules and finish things one at a time, often resulting in delays.  A common problem often arises when contractors work out of sync, where often mechanical trades need to return to a site and damage drywall or finish work. This situation requires the finish trades to then again return each time requiring additional payment. Often, inexperienced flippers install carpets or flooring before painting or final plumbing fixtures are in, resulting in high traffic and damaging floors. 

    These issues can be avoided by hiring a professional on site who reports to the property owner and sequences items in order to eliminate costly mistakes. Ultimately there is potential for plenty of profit in many house flips, but for remodel situations with slim margins, it's extremely important to follow a proper sequence of construction and itemize all materials and labor before labor begins.  

Eric Kosinski

RealtorĀ® / Sales Associate

The Van Dyk Group / [email protected]

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