Mark Anderson is a lead reahb consultant at MemphisInvest.com and his insight for investors and the experience he brings to the investor real estate property rehab team is fantastic. Mark has been investing in Memphis for several years and over seen not only his own rehab deals, but several deals for investors as well. He and I developed a series of articles and he even has a video series with some quick 1-minute tips that we are going to post on here. Be on the look out!
Why developing a scope of work on every project is critical!
A “scope of work” is crucial component of a successful rehab. Just like the offensive coordinator of your favorite football team draws up a game plan, you must do the same. At Memphis Invest, we’ve rehabbed hundreds of properties over the last few years and we still do this before EVERY rehab.
So how is it done? The process actually starts the first time you walk through a property. As you walk through, you should be making mental notes as to what you will do to the property if you close on it. Your scope of work will vary dramatically depending on your exit strategy, i.e. wholesale, retail flip, rental, etc.
After you put the property under contract but before you close, you will want to create a written, detailed scope of work. In this document, you will list everything that you want done, from installing new HVAC all the way down to the minor details, like what color you want the new doorknobs to be and how many doorstops the house will need.
Is this level of detail really necessary? Absolutely, and here’s why:
- You will get an apples to apples cost estimate from various contractors. You will provide your scope of work to each contractor so there is no confusion as to what you want.
- You will appear more knowledgeable and professional. You should be telling your contractors what you want done, not the other way around.
- It will help to eliminate surprises during the rehab. There will always be the unexpected surprise during the rehab process but by creating a scope, you will keep these surprises to a minimum. You will have already mapped out the entire rehab, reducing your chances for error.
- You are more likely to stay within budget. Once again, if you’ve thought everything through BEFORE you begin the project, you are far less likely to blow your budget.
- If you have your scope of work reviewed by someone else, you are more likely to catch mistakes and be able to make adjustments before you begin your rehab job.
If you are new to real estate investing, you will no doubt miss a few items the first time you attempt to create a scope of work. At Memphis Invest Remodeling Services, we’ve rehabbed so many properties over the years that we could almost create the document in our sleep, but yet we still do it for every project. Over time and almost out of habit at this point, we create a scope of work for every client on every house and still take the time to have it reviewed before we finalize the list.
Chris
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