My last post was about the importance of accurately calculating rehab costs. In it, I demonstrated how important these rehab estimates can be to our bottom line. They can change a potential deal from good to not so good, or prevent us from getting a potential deal. In this post I want to share a checklist that you can download and use to help you put it all together and accurately estimate rehab costs.
Inspecting Potential Properties
As real estate investors, our business means examining properties. However, the opportunity to examine a property can be limited or hindered. For one, there may not be much time to look at a property. Secondly, there are often a variety of distractions. These distractions are often other people. It could be the seller or a Realtor or other investors who are at the property the same time you are. Because of these time distractions and other people, it can be very easy to overlook or miss something when you are inspecting the property. The best way to stay on track is to use a checklist.
The Rehab Estimation Checklist
Every time I visit a potential property, I take and use my Rehab Estimation Checklist. I developed this Checklist over the years through trial and error after visiting numerous properties. It is simple and straightforward and allows you to make quick notations.
The checklist is a directory of the main components of any property rehab. It starts on the outside of a property and works its way inside. When visiting a property, all one has to do is follow the list and check yes or no next to the component. Marking yes on the checklist shows that the component will need to be rehabbed. There is also a space for any comments that you might wish to add.
It should take you no more than 15 minutes to a half-hour to completely go through a single property with this checklist. Once completed, you can return to your office and add costs next to the components you think will need to be rehabbed. So for example, if you note that the property needs a new roof, you can then use the formula noted here to determine the cost. If you not that the property will need interior painting, you can use the formula described here to estimate that cost.
Keeping On Track
This checklist serves several purposes. First, it organizes my thoughts and calculations. There can be a lot of moving parts in a rehab job. Being organized right from the start will help tremendously.
Second and more importantly, the checklist ensures that I do not overlook anything. As I said above, there can be a lot of distractions and it can be easy to miss something. Having a list ensures that I do not forget to check the water heater, the electrical panel or under the sink.
Third, if there is someone distracting me, the checklist helps stop it. Sometimes properties are vacant and you will be alone when you see them. But often there is someone else around and they will, wither purposefully or not, distract you. Trust me, people just do not seem to know how to leave you alone and let you look over the property. They will want to show you around. Having a checklist enables you to hold it up and say something like “I just need to look at these items on my list if you do not mind.” That will usually get them out of your way.
Download The Checklist
Checklists are an important part of any business. They help keep you on track and focused. With potentially expensive rehabs, a checklist is vital to your success. Download my Rehab Estimation Checklist here.
