How to Save Costs in Your Real Estate Renovation
How are you saving money in your renovations?
We all know that if you can decrease your expenses, you will increase your profitability.
Determining where you can save money can be a challenge to better understand and grow your talents.
Identifying where you have strengths, and where you have opportunities to improve, are important aspects to your potential growth.
When you’re investing in real estate, there are some known variables that can increase your profitability.
Knowing if you can apply these variables can be very helpful to your success.
Today, we will review some savings techniques within your renovations.
Let’s get started.
Depending on where you are in your investing career, you may or may not have time to implement certain strategies.
- Knowing where the best application of your time is, is for you to judge.
Assessing the cost savings, compared to another choice, is upon each investor to assess.
Today, we are going to review how you can save money in your renovation if you have the talent to perform the general contracting on your own.
- Commonly referred to as GC’ing.
Yes, there can be substantial savings and a grand learning experience, if you are up to the challenge of GC’ing your own project.
Let’s get into “the how”…
After determining the best use of your time, knowing the order of operations is the first determining factor of you being capable of GC’ing your own project.
- Refer to our prior article – Fix and Flip Order of Operations for guidance.
- There is a downloadable pdf that illustrates this order of operations guide as well on our Free Resources page.
You must know the order of what should be conducted first through last.
Regardless if you are GC’ing your own project or not, you should know how your operation should proceed.
Knowing this can help you be a better leader.
Better leaders have better employees and/or partners, due to their ability to build relationships.
- After knowing the order of operations, your next assessment would be time to completion.
- Yes, for each portion of the project (or scope of work), you should have a relative idea of how much time it should take to complete the task.
This doesn’t need to be on a very detailed level.
However, the more detail you understand, the better.
At a high-level, you should know how long it should take to complete the full scope of work necessary.
Benchmarks are important because identifying efficiency, versus a hired contractor with lack of comprehension, is very important.
You should be able to comprehend the level of talent you are dealing with for each prospective partner.
This leads us to the hiring process.
It will be necessary that you have point people for each scope of work within the total project that you will hire for.
- Perhaps, you have a flooring person, a tile person, a drywall person, a painter, an electrician, and a plumber, so on and so forth…
- Just as well, you may have various vendors for each material purchase you need as well.
- In fact, this is recommended. Find who has the best price and purchase the materials direct.
Layering in the materials and point people for each scope of work is a process that goes hand-in-hand.
- This is where you will collect the most savings.
Understand that when you hire a general contractor, you are paying for them to manage these things for you. You should also expect to pay an upcharge for any materials the contractor purchases for you.
You may have heard of investors having back-stocks of building materials (in storage) and this is the exact reason why.
Savings on materials and having those materials (by buying yourself) reduces your costs. Especially, when purchased in bulk.
- Expect your total scope of work costs to be at least 15% higher than if you were to manage/GC them yourself. More than likely, your savings will be 25% plus.
At times, you may have a contractor that can complete multiple scopes of work and this is a great partnership to have.
- When you are starting off, it is best to establish these relationships, and through experience, let those relationships grow and expand by building trust and rapport.
Hopefully, as you grow, you will need someone to GC eventually.
But, what better way to establish those relationships early on, by improving your knowledge and management skills while doing so.
Make an effort to start comprehending the cost of materials and the cost of labor.
As you commit to operating in this fashion, you will need the tools to support you.
- The interviewing process is the first portion of this process as you’re identifying talent.
- See a prior article Hiring Top Talent: 15 Contractor Interview Questions for support with this task.
- You will also need contracts to complete with who you hire, to hold both you and them, accountable.
- Consult with you attorney on creating a contract that covers all loop holes you prefer covered in your independent contractor agreements. There are many things that can happen that you want covered during the course of your renovations.
Becoming knowledgeable on the possible pitfalls is a very important aspect to understand when you are investing and hiring contractors.
- Another aspect of getting your projects done is being prepared to get the permits on your own behalf if necessary.
When you are GC’ing the project, you may need to get the permit yourself and communicate to the municipality what contractors are doing what scopes of work.
- Be prepared to register and pay for the necessary permits yourself as necessary.
- Add this to your list, along with the independent contractor agreements, W-9’s, and verification of licensing and insurance.
Be sure to check out our tools available to help you compute your numbers for the scopes of work and overall project.
Specifically, the Construction Investment Calculator can help you organize your scopes of work for each renovation, create target budgets, and help outline the costs of materials and labor for each line-item.
- Our Construction Investment Calculator, our House Flipping Investment Calculator, our ARV Investment Calculator, and our BRRRR Investment Calculator are all helpful tools that you can start using today. They are Microsoft Excel based files.
We hope this article has been helpful for you today.
Thanks for joining us today faithful readers – future leaders.
Love ya and continue to strive for growth.
Please comment what strategies you use to help save costs in your renovations.
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