How To Save 25 Percent On Your Next Rehab


In these thin financial times investors always need to pay attention to their bottom line, cost vs. value added. In just a few short steps I’ll reveal to you how you can add more value to you rehabbed properties while reducing your cost on all your future rehab projects. Looking at the title many may think, 25% isn’t that big of a deal because you have a contractor you’ve been working with and he/she gives you the best price around. I assure you that you still can save more on your rehabs by making a few simple changes. I will cover these changes and the steps necessary to implement them effectively.

There are many steps to reducing your cost of a rehab 25%, some may require very little work and some require your time, attention to detail, a little patience and establishing business credit. Wow, you didn’t see that curve ball coming. Business credit is essential to have and establish if you’re rehabbing properties and have established this as your business. I won’t go all into the in and outs of establishing business credit because that’s not what this is about, but you can visit for a complete detail explanation on how to begin getting credit in the name of your business.

Outline of the steps to saving 25% on your rehab.

  • Your Accounts & Contacts
  • (K.I.S.S) Keep It Super Simple
  • Setting The Guidelines
  • Finding The Right Contractor
  • Specials & Discounts
  • Replicate, Replicate, Replicate


Your Accounts & Contacts: Establish charge/revolving accounts at your local home improvement stores, such as Home Depot, Lowes, local hardware, local paint or local flooring stores. When establishing these accounts you also need to be mindful of developing a working relationship with store managers/supervisors. Explain to them what you’re doing and how you will be a high volume repeat customer. Once this is done explain to the supervisor that your contractors will pick up supplies for your jobs requiring all purchases to have a Purchase Order Number and a call needs to be placed to you for that Purchase Order Number. This is done for two reasons…. first, so you can verify what items are being purchased (so they don’t buy extra supplies or tools on your account), and second, you can control the cost of the material. This stops the contractor from marking up this price of the supplies needed. When rehab is complete keep all extra supplies…..they are yours.

(K.I.S.S) Keep It Super Simple: This is self explanatory; you want to keep things simplified. Always use the same kind of drywall, paint, tile flooring, carpet, light fixtures and so on. This rule keeps things in perspective as far as pricing and material is concerned. If you keep them the same from each project to the next then you don’t have to worry about purchasing new paint and all the other material each time you have a rehab project, you can simply start with the left over supplies from the previous job.

Setting the Guidelines: These are the guidelines by which you operate and conduct business with the contractors you work with. I have a few that MUST be followed no matter the contractor.

  1. Contractor MUST be licensed, insured and bonded.
  2. No drinking or drugs on the work site.
  3. Contractor MUST be willing to supply bids with labor only prices (I supply the material). Contractor also needs to give amount of material needed to complete the job.
  4. Contractor must agree to payment terms: 25% to start and payment in full ((CASH) which I will 1099 them for), when I have inspected and approved the work. I refuse to pay a contractor to do a job twice, meaning they do an incomplete job and I pay another contractor to correct it.
  5. Contractor MUST sign a release of lien on the property, so they can’t place a lien on the property for some reason without me having a way to defend it.
  6. Contractor MUST agree to complete the work up to standard in the timetable established or there will be a reduction of $350/week in price for every week they go beyond the original planned completion date.
  7. I also sign a contract with the contractor that states: If work site is vacated for 3 days without work being performed said contractor releases all rights to complete work and remaining payment due them. Said contractor can be replaced without any recourse be it legal or otherwise. The 3 day period isn’t in effect when holidays run the day prior to or after a weekend.

Finding the Right Contractor: While trying to find the right contractor to work with I suggest going over the guidelines with them. This will eliminate many of them because they make a great deal marking up the supplies, so they will tell you “I/we don’t conduct business that way”. There are many contractors out there still to work with because their work load has slowed due to the housing situation. When you have narrowed down your candidates ask them for references, to see pictures of their past work, when was their last job, and proof they are insured. It’s a good idea to have 3 to 4 contractors you will work with just in case 1 or some of them are busy on other jobs when you may need them.

Specials & Discounts: Specials and discounts come into effect after you have conducted business a few times with your vendors. These are the above mentioned stores or companies you purchase your supplies from. Once your track record is established it’s best to always work with the same individuals at these stores so they will have a firm grip on the types and kinds of material you are using. This person or persons can keep you abreast of specials and discounts coming up on the things you use. They will also be knowledgeable about any supplies or materials that are similar in appearance and quality to what your currently using that may be discontinued or on closeout, saving you a good amount of money. Always let the reps you’re working with know to stay on the lookout and contact you when they have these things available. Another good source for these specials and discounts are the items the keep in the back as vendor returns, they’re typically scratch and dent items that may have gotten that way during shipping. These items can be obtained at a STEEP discount. When utilizing these items I urge you to inspect them thoroughly, making sure that the blemish can be easily repaired by you or your contractor. With this established working relationship the store rep will keep you aware of any contractor specials or appreciation days they may have along with any coupons or special pricing they’re having.

Replicate, Replicate, Replicate: This is the easiest part of all. After following the steps mentioned above you will begin to see your savings ASAP, all you will have to do is repeat this process each and every time you have a rehab project. Feel free to tweak what I have outlined to fit your personal style or investing method.

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