This is the 4th episode in our ELEVATE Your Flip course. If you haven’t read the previous blog posts, the first episode, Denver Flipping Blueprint, is a good place to start.
This post is part of the ELEVATE Your Flip Course. The course gives you an introduction into fix and flipping properties in Denver.
Three Learning Options:
- Listen to episode “#130: Flip #4 – The Big 4 of Project Management for Flipping Houses: PART I” on the Denver Real Estate Investing Podcast
- Watch the YouTube video at the bottom of the page.
- Read the blog post.
Flipping Project Management
Even before you close on a property and are ready to start the construction phase, it’s important to have a detailed rehab plan and a statement of work completed. We’ll discuss the first two pillars to our system and how it will save you time, money and contractor headaches. ELEVATION’S Big 4 docs have been continually refined over the past 5 years in projects all over metro Denver in various price points.
We’ll start with the first two key documents to running a successful flip. These documents have applications to smaller condos and townhomes as well as larger single family flips. The two documents are:
- Rehab Pricing Estimator Spreadsheet
- Statement Of Work (SOW)
These documents should be completed prepurchase (after you have the property under contract but preclosing). About 1-2 days after the property goes under contract, we walk the property with the Rehab Pricing Estimator spreadsheet. This spreadsheet checklist works for single family flips as well as condos and townhomes and helps us budget to get within 95% of actual costs.
We get about an hour to inspect the property, maybe 2 if it’s on the MLS. We take photos and videos of every room. Preparation and organization minimizes your daily burn rate and carrying costs. Effective project management can save you a couple thousand dollars in time/money.
We then go through the SOW. We have different versions for single family homes and condo/townhomes. There are more sheets and tabs on the single family one, but no major differences otherwise. Typically we will use a general contractor on our single family properties who will hire out subcontractors. With our condos and townhomes, a single contractor will be doing a lot of the work themselves, so a more extensive Budget Rehab document is not needed.
Check out our ELEVATION Rehab Pricing Estimator to follow along as we discuss how to use the checklist. For a more detailed discussion of the checklist items, watch the video.
Rehab Pricing Estimator Spreadsheet for Fix and Flips
The columns on the left list rooms as if you are walking through rooms in a house. The columns on the right are used to create tally marks. You use the checklist by circling items and making tally marks.
We consider a “small kitchen” to be those in condos under 1000 square feet. Medium is up to 2,500. Large is 2,500 plus.
The kitchen budget box is broken up into cabinets + install, countertops, backsplash, open kitchen wall, appliance + fixture & finish and kitchen cabinet. Open kitchen wall.
We spend most of our time in the kitchen of properties – about 10 min typically.
The right column of the spreadsheet lists major systems in a home. These can be big ticket items which means they can spend our rehab budget the quickest. The major systems are:
- electrical panel
- Water heater
- radon (80% of projects’ basements have radon, so just assume the expense) ($1,500 if have to put in vapor barrier)
- electrical (4-5K to upgrade and rewire house)
Going back to the left hand side of the spreadsheet, you’ll see bathrooms. We break down the bathroom into vanity, shower walls, pan/tub and extras. Our prices include the product and labor. We always replace toilets and put in a fan if there isn’t one.
Moving onto the bedrooms and living spaces….
- We write down the number of bedrooms and their square feet
- There are typically 4-5 rooms we need to add
- The flooring goes in a different section and does not need to be included here
Moving onto the basement…
- It’s helpful to have a general note area of “basement” to capture anything we feel needs to be noted.
The section of the checklist that includes windows, doors, garage door, etc is set up tally style. We’ve found it’s best to count windows from the outside of the property, so they don’t get counted twice. The prices reflect Elevation’s pricing which may be better than what a typical flipper could get on his/her own.
We don’t include a dollar amount for paint, because it varies. The range is roughly $2,000-$4,000 for the interior and $2,500-$4,500 for the exterior. Drywall us $40/sheet. Texture is $4-$6 per square foot. We don’t automatically order a roll off for our condo projects. Concrete for driveways or patios is priced at $7/square foot. This does not include foundation work. Trash removal and landscaping are also taken into account.
This spreadsheet and the pricing in it allows us to get close to what the final rehab cost will be. We’ve found it catches 95% of the expenses.
That said, our sweet spot (types of houses we’re working with) are typically:
- Under 350 for condos/townhomes
- Under 600 for single family
- Not super high end
The spreadsheet works really well for these types of properties.
Statement Of Work for Fix and Flips
The next step is to go back to the office and complete the Statement of Work at the computer. We incorporate all the notes from the Rehab Pricing Estimator checklist and convert the checklist to more of a line item basis which we then give to our contractors. It helps us push our pricing method and give our contractor a budget range to stay within.
The SOW has 35 line items for labor/rough materials on average along with room for change orders and another roughly 30 line items for finish materials. The cost we specify for contractors is primarily labor only. They don’t pay for materials. Elevation pays for materials. This helps us keep our costs down. Plus we pay for all our materials on our credit card and get points.
This also helps contractors, because they don’t have to float money on materials. Their draws go solely to them and their labor. The numbers used in the video example are live numbers for a townhome in Lafayette, Colorado. They are all labor (not materials). The SOW includes a notes column for clarification. This is good for contractors and Elevate, so everyone is on the same page. The example given includes 4 change orders. These are things you discover or decisions you make as the project progresses.
We typically see a contingency of 10%. The SOW allows us to track estimated and actual expenses.
Go to the Denver Fix and Flip Investing Consultation page to learn and more and schedule a call.
Webinar recording – Watch it here or listen on the podcast.