The construction of the project can be the one thing that turns a great deal into a bad deal. It is important to create a budget and stay as close to that budget as possible. Part of staying within your budget and making a ton of money in this business is getting great deals on your rehab.
Here are the top five ways to save money on your rehabs:
- Have a solid plan and a budget. You want to be as clear and detailed as possible. Your contractors can help you with this during your diligence process, but you want to use your own numbers and not just what the contractor tells you. You will also want to include a contingency for anything you don’t see before you start, or for items that end up costing more than you thought. It is important to know what you are going to do and what it should cost before you buy the house.
- Pay with a debit or credit card that includes a discount or a rebate. For example, Lowes offers a 5% discount on all purchases using their card. You also might have a major credit card that gives you cash back or other reward program.
- Buy in bulk. If you are doing a lot of projects this is easy, and you are probably already doing this. If you are just getting going or only doing a couple deals a year, this can be more challenging. My suggestion is to find some designs that are natural and popular and get a group of investors to go in on buying the material. For example, maybe there is a specific tile or granite that you like and plan to use in your projects. If you get a group of investors together all working on a project, you can team up to get the best deals. A great place to find investors doing deals is networking on and offline. The Pine Financial Group Happy Hour is a great place to meet local and active investors.
- Look for sales and stock up. I remember my grandma buying cases of toilet paper, paper towels and anything else that did not expire, when it was on sale. Heck, she would even buy things that did expire if she thought it was a great deal. This is a solid strategy for business too. As long as you have a place to store them, buy things you know you will use, like outlet covers, light fixtures, and plumbing fixtures, when they are on sale.
- Negotiate with contractors. When you are just getting going, have several contractors show up at the same time to bid your job. This will save you time by walking through the project only once and it will create a competitive environment. This might be uncomfortable for you, but it will be profitable. Once you start getting bids in, you can call them back and ask them to do better. Contractors will hate this, but it is a great way for you to save some money and they can always tell you no. Once you become more experienced and you start learning what certain items cost, you can set the price and call contractors and ask them if they can get it done for that price. I have a house in Colorado Springs that needed a new electrical box and the box had to be moved. I know that a price of $1,500 including the permit is profitable for the electrician but is a great deal for me. I did not know any electricians in the Springs, so I started asking for referrals. When the referrals starting coming in; I sent them to the house and told them I would not pay more than $1,500. The third electrician that looked at it wanted the work, and I got what I needed for the price I wanted.
