Rehabbing an investment property is typically thought of in the romantic sense. Buying a badly damaged residential property, spending money and time on it, flipping the home as a newly renovated & attractive house, and then walking away with a good-looking wad of cash is certainly dream of all prospective investors.
But don’t be deceived. There is much to learn regarding property rehabbing prior to you buying your very first property. Being a great realty investor and doing a great job as a rehab pro definitely aren’t the same animal.
The following are a few points that any real estate investor must understand about rehabbing investment properties.
# 1 The Investment Property is Not Your Residence
Remember, property investing is all about the churn. Investment properties are Investments – not your personal place to set up residence and get comfy.
Every house, apartment or commercial structure that you acquire to rehab should make you money, so each move you make concerning a rehab should always be about the bottom, line. If you fail to look at it this way, you will not see a sensible return on your financial investment, and your investment activity will probably come to a screeching halt.
# 2 Almost No One Can Rehab an Entire Home Alone
Even a licensed contractor will utilize subcontractors to do pieces of a rehabilitation. You can be the most skilled builder in the world, but rehabbing an entire home is not for the faint of heart & certainly not for just one person.
Excellent rehabbing projects count on knowledgeable professionals, who can get the job done fast and effectively.
Along with contractors, you’ll wish to utilize a legal representative to handle permits as well as regulatory inquiries, and an accounting professional to be sure that you get all of the tax advantages that you can.
Carrying out all of the rehabilitation tasks yourself isn’t only not practical, it becomes crazy eventually.
# 3 Rehabilitation Budget
Never get a residential or commercial property without approximating the repair work with your specialist, and also never ever start a rehabilitation without a spending plan.
Leave space in the budget for unexpected costs and overruns, and after that – keep the job as near to the spending plan as feasible without compromising earnings.
# 4 Collaborating with the Right Specialist Makes Money
Attempting to conserve cash using a low-cost or inexperienced service provider frequently leads to catastrophe, and kills your earnings.
Economical contractors will make grandiose guarantees, but they will not be the most economical selection over time. A respectable, knowledgeable, and licensed specialist that sets you back a little bit more will generally lead to a greater level of success in your rehab, while keeping quality levels where you need them to be. And, this kind of specialist is likely to work with subs that provide the very same top notch job, all of which add to finishing the rehabilitation faster and also contributing to your earnings potential.
# 5 Check out the Permits
Permits can be the investors Achilles Heel:
Not inspecting authorizations for additions to the building by a prior owner might cause you to not be able to market the residential or commercial property. The lack of permits prior to starting a rehabilitation might result in your work being shut down by the authorities, postponing the job and seriously increasing expenses.
Brand-new investors, in particular, encounter issues with permits, mainly because they have no knowledge of the regional laws.
As a new or experienced investor and flipper, you must fully check out any permitting issues before you buy a property that you’re considering rehabbing. At the very least, you’ll know what you’re in for if you decide to move forward with the purchase.
Finally, never ever start doing your rehab before your permits are all signed, sealed and delivered. If you get your contractors working on a rehab before it’s permitted, you’ll find yourself in a world of hurt with a bunch of fines that could be levied against you by the local authorities.
We’ll be covering much more on the things that you need to know before getting into your first rehab. Hopefully we can help you to avoid some of the pitfalls that can easily come up during your first time out.