Rehab Budgeted: $40,000
25% Budget Buffer: $10,000
Actual Spend: $49,000
We went over time and budget on this project! Luckily we planned and budgeted for that possibility, so this property still refinanced out 100% of the capital in the deal.
So what happened?! We had some management growing pains while running several rehab projects at once, and managing a new crew. We have since changed some of our systems and processes to keep things tighter, which has been working well.
The preparation for your rehab can make or break your project.
Plan: HGTV is great, but not every property needs to be (or should be) decked to the nines in the highest of finishes. Your market research will help determine which upgrades will bring your property the most value. Look at close comparables, determine their finish level, and then go one tier higher to be competitive.
Budget, then budget more, especially your first few projects, you will likely go over budget. Its a learning process. Be sure to factor in a contingency budget. (I highly recommend not buying a project that would be underwater if you went 50% over budget or time for your first few projects.)
And that’s why we call this, The Tree House. 1 day after we put a brand new roof on the house & garage, a tree from the neighbors yard fell onto the garage and punctured all the way through the plywood in 5 places. Luckily it was just the garage, and we had room in our contingency budget to absorb the cost.