Last Updated on February 17, 2022 by Mark Ferguson
I have flipped almost 200 houses in my career, and I will pass that 200 mark later this year. I have also bought close to 30 rental properties that have ranged from 800 to 68,000 square feet. Over the years, I have learned a lot about how to remodel a house. In fact, even as a professional, one of the hardest parts of the business is still remodeling homes even after almost 20 years. I do not do the work myself. I have in the past, but now I hire out everything, and it is tough finding the right people and deciding what the right mix of fixing and not fixing is. In this article, I will try to give you an idea of the best approach to take when remodeling a home and the major mistakes to avoid.
What are the basics of how to remodel a house?
When I flip houses, almost every house I buy needs work. Most of the rental properties I buy need work as well. I want a really good deal, and sometimes that takes buying properties that need to be remodeled. What are the basic steps to take when remodeling a home?
Assess what needs to be done
The first step to take when you remodel a house is to figure out what you want to do! This can often be the hardest part. You don’t want to make the home too nice for the neighborhood or you will never get back the money you spend when it comes time to sell the home. You don’t want to do too little or you might leave money on the table. I like to take the route of doing just enough to make the home as nice as other houses that are selling in the neighborhood. Sometimes that means going to look at those houses for sale and deciding what level you want to be at. Doing $20,000 in work may bring $40,000 more in value, but doing $40,000 in work may only bring $50,000 in value.
This step can be tough to figure out because if you live in the home, you also need to balance what you want as far as creature comforts. You may want to go above and beyond what makes sense due to your personal preferences. That is okay as long as you know you may not get that money back. My article on what home remodeling jobs bring the most bang for the buck goes into more detail on this subject.
Decide how you are going to handle the remodel
Another big decision is how you are going to handle the remodel. Are you going to do the work yourself? Are you going to hire a general contractor to do it all? Are you going to hire subcontractors and are going to manage it all?
In my business, we act as the general contractor and hire out all the subs, or we use employees. It saves us a ton of money to run our business this way. Here is what I mean by each term:
A general contractor runs the show and hires everything out. If you want a new house built, the general contractor or GC should be able to get it all scheduled and completed. Many times, the GC will not do any work themselves: they simply manage everything. A good GC can be great, but they are usually expensive as well.
A sub is someone or a company that specializes in a certain aspect of construction. We hire subs all the time for plumbing, electrical, foundations, HVAC, roofing, landscaping, flooring, painting, and more. Subs are specialists, which means they are often faster and cheaper than general contractors.
Handyman or woman
A handyman or woman is someone who can do a lot of different things but is usually not classified as a GC because they are not licensed or do not have the capability to run a crew. They do all the work themselves to varying degrees of quality. Some can be great, and others can be quit poor! I also find than many handypeople are great at certain things like drywall or painting but are not so great at plumbing or electrical, although they tend to think they can do anything.
We use handymen or women all the time, but we figure out what they are good at and stick to those items. It can be rough trying to use them as a general contractor because they may claim to be able to do everything but not really know what they are doing. It can also take a long time since it is usually a one or two-person show.
I run a fairly large operation, and I have a project manager who runs everything for me. She is great at her job and schedules everything, hires subs, decides when work should be done, and basically takes on the job of the GC but for 10 to 20 projects at once. It does not make sense for a homeowner doing a one-time remodel to hire a project manager, but it might make sense for real estate investors who do a lot of deals.
For small jobs that are not complicated, a handyman might do the trick. For larger jobs, you might want to use a GC or try taking on the role of GC yourself and hiring subcontractors. How much you do will often depend on your level of knowledge and time you have to dedicate to the project.
How to find the right people to help you remodel a house
Now you have decided what work you want to be done, and you have decided how you want to get the work done. How do you find the people to do the work? This can be tough and can be the number one way people lose money in real estate. We go through a strict recruiting process when looking for people.
- We search for people by browsing Facebook Marketplace, Craigslist, Angie’s List, Thumbtack, or by referral.
- We email them or call asking a list of questions about how they work, what they charge, and when they have time to start.
- We ask them to send a resume to us and a few references of work they have done recently.
- If they complete these tasks (which many won’t), we schedule a meeting in our office. At the office, we talk about the same things and make sure they have their own tools, truck, and seem like a good fit. We also make sure they are on time and communicate well.
- If they pass that test, we meet them at the job site and have them give us a bid on the work to be done. We make sure the bid comes in, and we compare it to what we think the work should cost. Sometimes we have multiple bids.
- If they get past all of this, we hire them on a small job first. I never hire brand new people to start a $30,000 rehab or more right off the bat. I want to make sure they know what they are doing, show up, and get work done in a timely manner before I make a big commitment.
This is the process we use for a contractor or handyman that will be doing a lot of different work. For a sub who may only be doing a small job, we will skip some of these steps as references and a decent bid will be enough to try them out. I have another article that goes into much more detail on how to find contractors, subs, etc. here.
Why are bids so different?
There will be a huge price range for bids on remodeling jobs. Some contractors prey on homeowners who have no idea what things should cost. We have seen one bid on a foundation for $84,000 and another for $5,000. Both fixed the problem and came with a letter from an engineer. We have seen a bid for a sewer cleanout of $7,700 when another company did the work for $185.
Other contractors will be fair, but they still need to make a living as well. There is a trade-off between how much management and effort the homeowner wants to put in versus how much the project will cost. If you are the project manager and act as the GC, it can save a ton of money, but it takes work.
How do you choose the right bid?
When you are getting work done for the first time, or even for the second third, fourth, or fifth time, it makes sense to get multiple bids, especially if you are not sure what the project should cost. When you get those bids, how do you know which one is better, and how do you keep getting bids?
First off, I would realize that contractors don’t get paid to come up with bids: they get paid to do work. However, most know that part of the business is coming up with those bids and getting some jobs while losing others. I would go out of my way to reward people who are willing to give you bids in a timely manner. Take them to lunch, get to know them, pick their brains about the bids and why they bid them as they did. If you can’t do that, give them a Home Depot gift card.
We often go with the cheaper bid, but I also have a good idea of what repairs should cost. I know if someone is way overshooting things or even coming in way too low and are sure to increase the bid as time goes on. Whatever bid you go with, start them slow! When I start a new contractor, I do not give them an entire house off the bat, I have them start with the bathroom or a small project to see if they show up, do good work and are honest. If there are problems from the start, I know to move on. This process may cost a little more money because small jobs often come with higher price tags relatively speaking, and it may take more time, but it is worth it. Taking a little more time and being careful will often avoid the massive horror stories of contractors taking half the bid up front of an $80,000 remodel job and leaving town.
How do you pay the contractor?
A lot of contractors want a lot of money up front to pay for materials, to pay their guys, and to know the customer will pay them. I hate paying money up front, but I know it is needed on certain jobs. This is another reason to start with a small job first to see how they do and if they will perform. If you spend half of $4,000 to remodel a bathroom and the contractor bails, that is not as bad as losing $40,000 on half of a major job.
This is also another reason it is nice to break up the work and pay subs yourself. If there is a problem with a sub, they are not derailing the entire project and budget. You can often pay subs little up front or sometimes nothing because they have a smaller job and less risk.
For big jobs, I like to pay 25% up front, 25 percent at the halfway point, and 50% when it is all done. A lot of contractors do not like this, but what other profession gets paid half the money before they work even gets started? I also pay for all of the materials. I know many contractors mark up the materials and use the excuse for big upfront payments that they need to buy materials. If I am paying for them, it takes away that need for so much money up front. I can buy things at Home Depot over the phone and with a Pro Account with text messages, so it is not a big hassle.
Should you do the work yourself?
I fixed up a house on my own in 2006. I learned a ton! I learned never to do it again. I learned that contractors are much better at repairs than I am. I learned how valuable my time was, and I was more productive doing other things. I lost money on that house because it took me so long to flip, the work was not as good as it should have been, and the market was decreasing while I owned it. I also lost money because I was not working as an agent or finding other deals.
For most people, it does not make sense to do the work yourself on a house if you are flipping or buying rentals. It takes time away from your work, your family, and finding more deals. If you are a homeowner and living in the house, it might make sense in some circumstances. When you live in the home as you do the work, it does not take as much time away from your family. You do not have to commute to another property, and it can be a fun thing you do together. Since you are living in the home, it is not costing you money every day the house is not finished like it would on a flip or rental.
What do you do first?
Another question I get all the time is how do you decide what repairs to do first? If you hire a GC, they will decide that for you, but if you go the handyman, sub route, or do the work yourself, that is up to you. Here is my take on what repairs to tackle first:
The first thing is always tearing out what you do not need. This way you can get a good look at the condition of the house and see if any major surprises are lurking in the home. I try not to demo anything that does not need it as the more you tear out, the more money you will spend.
Electrical, plumbing, HVAC, foundation, Mold, etc. If there is major work that needs to be done, I have that started first because they may make a mess of the home. You don’t want to install new drywall and paint only to find out the electrician must tear it all out.
Windows and doors
When putting in new windows and doors, it often does some damage to the drywall and sheetrock or trim. This is one of the first things we do.
If the home needs patches or is a complete gut, I would do the drywall and sheetrock next since you need that in place before installing new kitchens and baths.
I prefer to paint early because then you do not have to mask everything you just installed. You may have to come back at the end for touch-ups, but that is usually easier than masking the entire house and then most likely still having to come back later for touch-ups.
Kitchens and baths
I install the kitchens and baths next after the paint is done as we won’t have to mask them off.
We install light fixtures nex,t but it can be done at the end as well. They are not too messy, but we want them installed after the paint is done.
We try to do the flooring last because it gets trampled and damaged if a lot of other work is being done after the flooring is installed. Some reasons might be if the floor needs to be installed prior to kitchen cabinets being installed.
Finally, we blue tape the house for anything that needs to be touched up. The flooring guys usually mark up the trim, and some of the walls might need to be touched up or a few spots may have been missed in the beginning. Make sure you keep the same type of paint for touchups! Use the same sheen and color, and keep an old bucket of paint to mix with the new paint if needed so there is not a glaring difference where the touchups are done.
What if you run into problems?
if you have problems with a contractor or a sub or a handyman, my advice is to cut ties as fast as possible. There is a 98% chance things will not get better, and they most likely will get worse. This is why it is best not to pay too much money upfront or start with small jobs because if there are problems, it is much easier to move on to someone else.
It is also wise to check in on the work often! Do not sit back for a month without seeing the project, asking how it is going, and making sure it is on budget. Be very clear that if there are any change orders that will add to the cost, you must approve them first.
It can be a tiring and frustrating process to remodel a house if you don’t take your time to get the right people to help. It can be a wonderful and fulfilling process with the right people. There are many things that can be done to help the process go smoothly. Do not be afraid to get multiple bids, speak up, or take charge if things are not going as planned!
P.S. My new book was just released! Build a Commercial Real Estate Empire! You can get it on Amazon now! https://amzn.to/2Y2J41c
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