On today’s blog we will talk about what a fix and flip property is and the step you need to take to achieve this. A fix and flip is to identify the property, purchase it, perform all the renovations or repairs, and then resell it for a profit. On today’s blog we will talk about what a fix and flip property is and the step you need to take to achieve this. Now, let us look at the seven steps you need to take to complete a repair and rehabilitation on a property, a particular favorite process of mine.
1. Develop the scope of work. If you are a contractor, you will understand the term scope of work – exactly what will be repaired. It must stipulate precisely what they will do. Also, you need to identify if they’re going to supply the materials; a separate list for what is for materials and what is for labor is drawn up. Also, who is responsible for transporting materials all these as well. If you’re hiring a general contractor, will he be responsible for every aspect of the job? Or do you have to have any input? Generally, when you hire a general contractor, they will take care of everything, and then you will manage the individual contractors. But remember, this is still your project at the end of the day, and you are entirely responsible for it.
2. Prepare a Contractor Bid. If you’re in an area you don’t know very well, I would advise obtaining three quotes. It’s essential that you prepare a detailed scope of work, and an exact copy is given to each contractor so you can compare apples to apples. As I mentioned, separate the materials, and the labor costs as some contractors will provide a total estimate or quote. Some contractors may omit labor or materials from a quote to make it look cheaper, so don’t mistake not checking the quote to ensure everything is included. So it’s essential to compare the three quotes under the same requisites, labor and materials.
3. Sign Contractor Agreements. Here is where you will sign all the contract documents; first of all is the contractor agreement with the agreed detailed scope of work. It will include the payment schedule, including stages of payment and what exactly you will pay for regarding materials. It’s critical that the contractor has liability insurance and also workers’ compensation; just in case of an accident or injury; you don’t want a lawsuit to deal with. You can have a W9 form; this is for the United States, and the W 9 form is something that outlines all the contractor information, social insurance number, and legal registration with their bank details for payment. You will also require a lien waiver signed on completion of the scope of work.
4. Demolition and Clean Up Meeting. Depending on how extensive the renovation is, especially if you are demolishing walls and internal structures, you definitely need to meet with the contractor’s team. If you’re doing something simple, like a cosmetic job or painting, you probably don’t need this meeting. With more extensive projects, I would advise you to meet with everybody, so the team understands what is happening. You may discover mold, or maybe there is a wall that required demolition, and you find out during the project that it requires extra work like moving some of the plumbing or electrical. If something wasn’t accounted for in the first quote, that will add additional money it needs to be accounted for. So just do the walk around and see if there’s anything else that you missed or that the contractor did not put into their quote, and you can adjust that accordingly.
5. Supervise Work. You want to ensure everything is on time, budget and in the correct sequence. To manage any issues or problems that may arise during the project for the contractors or subcontractors. These issues may affect the project’s timeline, and you will need to deal with the contractors to work around them and find alternative solutions within budget. Regular Inspections of the ongoing work are very important to stay on top of any potential delays. There is a logical sequence that you need to follow when refurbishing a property, which is marking the layout, talking to the framer, plumber and the electrician to ensure they have the materials required for the scope of work. The heavy demolition work needs to be done first, but make sure both your plumber and electrician know of this so they can reroute wiring or pipes if required. Once the electrician and plumber have finished their work then it’s an ideal time to insulate the walls. After that, then you’re going to be doing quite a lot of work, including the drywall doors, windows, trims and all the interior painting. Then the plumber and the electrician will return to complete the final connections. After that, make an inspection to make sure that all of the connections work properly, that you have water, and nothing is leaking. When you are happy that everything is in place and working properly, then you do your flooring. Flooring will always be the last job you do. When that is finished then you are ready for a cleanup. After the cleanup is an ideal time to verify city inspections or any other legal requirements the property may require.
6. Final Inspection. So you’re going to do a final inspection and make sure that everything is completed to your specifications and scope of work. If something is not correct, this is the time to address it with the contractor or the general contractor. Then at this point in time, if everything is up to your standards, now you’re going to get the contractor or general contractor to sign the lien waiver.7. Payment of Contractor. Remember, the lien waiver is an important document, because if something happens and the contractors or subcontractor come back and says they weren’t paid or if there is any other dispute, they can put a lien on the property. When they sign this waiver, then its evidence that you have paid them, and all the work is completed. Then you can go ahead and do a thorough cleaning of the property before presenting it to the real estate agent for viewing.
I hope that this blog has proved helpful, if you need any further information or detailed advice, please have no hesitation in contacting me. Until next time, invest wisely.
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