From the outside it doesn’t look like much is going on. Even if you peek in the windows, you’ll still see a raw gutted main floor. You’ll be surprised, “Wasn’t this supposed to be done by now? It’s already been a couple months!” Here's the reality check part: things don't always go according to plan, and surprise is a very bad word in real estate.
I sat down with Kevin Johnson of Chief Concepts, over a cup of coffee to find out what happens before he even writes an offer on a house. Over the years I've had a lot of would be investors get all excited about buying an investment property. The first thing I ask is," What's your strategy?” No one is really prepared to answer except a seasoned investor.
Real rehabbers and investors make a plan once they see a house. Like Kevin, they will look at possibilities for rehabbing house in different ways. As an example, he might want to tear off the roof to build up, or build out the basement, do one or both. In construction anything is possible, it's a matter of dollars. The question is: how much house will this neighborhood bear, what does it take, how much can I sell it for, and is there enough profit to make it worth the work? I guarantee the contractors do not watch HGTV. Rehabbing goes off script, over budget, takes longer than expected, has no commercial breaks, and everything is inspected.
Construction budgets are about time, money, materials and labor. The time of year is critical. Even though buying in the fall and rehabbing through the winter so the home is ready for the spring market sounds ideal, it poses challenges. Exterior work needs to be done when it's above 40°. Budgets are built around timelines, and having subcontractors ready to go can make or break a rehab project. There is a shortage of contractors affecting both rehabbers and new construction. The eastern Twin Cities got hit with hail storms last June, roofers were booked out for 3 to 6 months. Crews often travel to disaster areas where local labor is overwhelmed and need more hands. Because there was fire, flood, and hail in Texas, Florida, Puerto Rico, and California, the shortage of subcontractors became critical. Disasters on a national level affect the supply and demand locally, we’re still feeling it. Contractors troll job sites to scalp workers for their jobs by offering them training, more money or better conditions.
The house on Sixth Street needed painting done before the weather turned cold. Windows needed replacing, some are done, and some are waiting. The biggest hold up was waiting for the HVAC contractor who was booked two months out to finish the furnace. Two months throws a schedule way off. There are some projects that can't be done without heat in a Minneapolis winter. It is less than ideal to schedule labor without heat, and materials perform differently under very cold or hot conditions. So does labor.
Here is what the timeline was supposed to look like; 1. Tear out, 2. Painting exterior, 3. Clean out, 4. Windows, 5. HVAC, (Inspection) 6. Plumbing (Inspection), 7. Framing new basement staircase, new bathrooms, upstairs bedrooms, kitchen, basement family room and bedroom, 8. Electric (Inspection), 9. Insulation, 10. Egress windows (Inspection), 12 Bathroom plumbing, 12. Drywall, 13. Flooring, 14 tile work, 15. Kitchen cabinets, 16. Back splash, 17. Kitchen plumbing (Inspection) 18. Interior painting, 19. Punch list (final inspection by city).
So, here's what it actually looks like; 1. Tear out, (dry rot found in walls, insulation in ceiling falls out) 2. Hole in the roof repaired, 3. Painting exterior, 4. Clean out, clean out more, remove old bathrooms, clear kitchen, and more dumpsters. 5. Cover old windows, 6. Replace with new windows, 7. Frame new basement staircase, 8. Frame two bathrooms, basement bedroom, Family room, 8. Remove old basement stairs, 9. Two basement egress windows, 10. Waiting for HVAC, 11. Waiting for HVAC, 12. Still waiting for HVAC (Inspection) 13. Bathroom plumbing (Inspection), 14. Electrical (Inspection), 15. Bathroom tubs arrive, 16. Drywall, 17. Tile work, shovel snow off walkways, driveway, 18. Flooring, 19. Kitchen cabinets, shovel more snow, 20. Back splash, 21. Finish kitchen plumbing (inspection), 22. Interior painting, 23. Hardware, 24. Punch list, and yet more snow, 25. Final inspection by city, 26. Another Vodka please.
There is no fast forward. This is a simplified version of what really happens. #18. Flooring, is really installing different flooring in different parts of the house. Bathrooms and the kitchen usually have hard flooring, the basement may be carpet, tile, and laminate or luxury vinyl. The main floor could be a combination of refinished hardwood floors (if salvageable) and/or carpeting.
Buyers of rehabbed homes don’t need to know every step of the way. What they do need to know is that the real process is more than a TV reality show, it takes much longer than an hour, and it isn’t a perfect process. Think of the General Contractor as a circus ringmaster juggling schedules and materials to make magic. He is the magician who turns a rundown lack luster home into a charming jewel. It’s a jewel that you might want to buy. Stay tuned, we are almost there.