Rehab Sucks...

Did you start investing in real estate because you love construction and rehab?  I am willing to bet you are just like me…and the answer to that question is a HUGE NO!  Sure, maybe you like seeing project transformation, but I highly doubt you love dealing with budgets, schedules, permits, change orders, hidden damage, and contractors…!

If you are like me, you got into this business in order to improve your financial situation in some form or fashion…not deal with construction.

Yet, construction is one of the biggest parts of real estate.  It can make or break any deal.  It can make or break your psyche.  It can make or break your bank account.  If this is the case, why not get better at it?  Why not learn as much as you can, so you can avoid the budget breaking mistakes?

This is something I fought for YEARS!  Yet one day I got fed up with not understanding rehab, feeling like I was being taken for, and going over budget due to change orders.

The longer you wait, the more painful it may become…if you are interested in learning some of my most painful rehab lessons, continue reading below.

Once again, I personally write these

Inside the Trenches:

Nowadays, hundreds of rehabs and deals later, it is a very rare occasion that I come across a rehab/construction situation that I have not seen before.  Unlike in the past, these ‘surprises’ that come up on projects use to really stress me out and take up a lot of my mental space for a long time. Nowadays, I guess I am calloused, and my reaction is more like “ha, that’s a new one, kinda funny..”

I can write a novel on doing rehab as a real estate investor (maybe one day, but my good friend J Scott wrote “The book on estimating rehab costs” already and thats a really good book to check out on this subject), but in the meantime, I want to list out some of the biggest painful learning lessons I have had with rehab…enjoy:

• $13,000 Surprise Sewer Replacement… at the end of the project while under contract to re-sell.  Depending on your market, you may have very old sewers (like the Seattle/Tacoma area).  I spent four years in this market without doing a whole lot of ‘sewer scopes’ and taking the risk on if a sewer is good/bad.  Sure, I had a few repairs that would equate to a few thousand here or there, but i still never did a sewer scope.  Until one day, after a 5 month rehab on a Seattle project, after getting the property under contract to sell…the buyers did a sewer scope and found the sewer completely destroyed.  Long story, but due to the unique situation of the hillside the house was on, we spent $13k to replace…needless to say…I always get sewer scopes now (and use to negotiate deals at times).

• Red Tagged… Do you pull permits on your projects?  I know a lot of investors that say “when I need to.”  Which usually means…no.  Don’t get me wrong, I think there is a lot of red tape when it comes to permitting in SOME cities (not all).  I also know that my market is one of the worst in the US. Yet…the first time you get a red tag, it teaches you a few things.  One, the city will usually make it very hard for you.  Two, it would have usually been easier to just get the permit in the beginning.  Red tags can be devastating to your budget and rehab depending on WHEN you get it.  Get it early in the project, no biggy.  Get it towards the end…you may be ripping out a ton of stuff (like I had to).  I have found for most (not all) investors, the longer they are in the business, the more likely they just go get the permit.  

• Not all basements are ‘dry basements’... In some markets, it's very common to finish out a basement and count it (or some of it) as livable square footage.  There are even basements called ‘daylight basements’ that are typically on a hillside of some sort, where a portion of the basement is at full level grade with the ground.  It’s awesome to add square footage by finishing a basement!  It is not awesome to finish a basement and later find out it leaks/floods water when it rains a ton or when the water table rises (hydrostatic pressure).  It’s a hard lesson to put tens of thousands into making a beautiful finished basement in the summer, to have it flood in the winter after heavy rains.  Unfortunately this happened to me more than once.  

• Roofs… In general, replacing a 30 year comp shingle roof is pretty straight forward.  But…not always.  Finding out after purchase that the roof has two or three layers, or a bunch of sheeting is rotted (or not there at all), can really add up.  If you think a roof needs to be replaced, its very easy to just call a roofer or two to come take a look before you buy (or a home inspector). 

• Finishes… It didn’t take me long to realize that I should absolutely NOT pick out finishes.  Additionally, realizing that the ‘buyers’ or ‘appraiser’ (if keeping) doesn’t care what the house USED TO LOOK LIKE, they care about what it LOOKS LIKE NOW.  If I bought a totally messed up house, it doesn’t matter to the buyer/renter what it ‘use to look like’ in order to determine its value.  Comparables determine the value, and if your finishes do not match the comparables, you will not get the value.  Additionally, for those of you that love interior design, note that not everyone appreciates the finish quality depending on where your project is.  You can go WAY over budget on finishes no one cares about but you.

• And so many many more… If you are interested in learning more and breaking down how to find red flags on a project, then join me on my free webinar this Thursday 4/17/25 at 4:00pm Pacific time.  I will go over how to spot a lot of the major red flags on a project BEFORE you buy it.  I will show you multiple live deals and projects that I am and have worked on, where the hidden damage is, and how you can use this info to better underwrite your next deal.  Register today, if you cannot make it, we will send you the recording (but you have to register).

Best of luck to you rehabbers out there!

Tarl Yarber

PS: register for my webinar on rehab and finding red flags BEFORE you buy a deal HERE