There’s a common misconception among the general public that the only thing you need to execute a successful renovation is a good contractor. While this may be true when it comes to small projects or updates on well-maintained homes, it is far from ideal when it comes to distressed properties.
Homes that are “distressed” are often real estate owned (REO), meaning that they are owned by a lender. Unfortunately, these properties frequently fall into a state of disrepair prior to reverting to bank ownership. Even if the homes appear to be in fair condition, there’s a good chance that they require more work than meets the eye. Most of the time, however, these homes are a clear, visual representation of their very namesake: distressed.
The renovation and rehabilitation of properties that fall into this category require a skilled construction management firm with plenty of REO sector experience. Here’s why.
An experienced construction and contracting manager will know exactly which household items to inspect prior to starting a project. They are familiar with common foreclosure problems and make it a point to ensure that ALL aspects of the distressed property meet modern building and safety standards upon project completion. The odds are that their REO experience has exposed them to a whole slew of unusual situations, thereby improving their background knowledge and enhancing the likelihood that they’ll catch potential problems before it is too late.
There are so many factors that go into rehabilitating a distressed property. If a single step is completed too early or too late it could have disastrous and expensive consequences for the entire project. A specialized construction management firm will work hard to ensure that project coordination is a top priority. They will organize the workflow and keep track of critical milestones, all while keeping a careful eye on the project timeline and remaining on schedule.
Because many of these companies accept projects across the entire country, they are extremely skilled at researching the markets in any given area. They can formulate a strong assessment of the neighborhood comparables and ensure that the end product is competitive with other housing in the area. This effectively eliminates the potential for “over-rehabilitation,” a process by which the updates made to a given house make it more expensive than any other houses in the same neighborhood. An overpriced house is difficult to sell and you’ll likely have to cut your margins and accept less than the house is worth.
Hiring a reputable construction management firm with experience in managing the specifics of home rehabilitation is the best way to protect your real estate investment.