- Define who you are– I break down rehabbing into 3 categories – light , medium and full gut. What type of rehabber do you want to be? Are you looking to do just a little bit (paint, carpet, refinish floors) – light rehab and put it back on the market? Medium – light rehab + kitchen and baths? Or are you looking to do a full gut and completely redo a house? Know this before you even start looking. This will help you when narrowing down your list of potential properties.
- Know your budget before you even look into houses – how much can you spend on the project? How much cash do you have available? Are you borrowing money for this project? If so, how much of a loan will you qualify for?
- Do not get stuck on 1 house – don’t chase a house. There are plenty of houses to flip. Make sure you find the right house in the right area, and get it at the right price. The right house in the right area at the wrong price will kill you.
- Make your money when you buy the house, not when you sell it! Make sure your buying at the right price. Buying the property at the discount to fair market price is what drives your business. In the long run, overpaying for houses consistently will be a killer, especially if markets flatten or contract.
- Always run your own comps – I’m sure you have a great realtor, but at the end of the day you need to be certain that your numbers are correct. Run your own comps, get your Realtors comps and I would suggest reaching out to an appraiser and getting a desktop review done. Compare all of those numbers and see where you should end up.
- K.I.S.S. – keep it simple stupid. Do not over rehab a property, and especially do not over rehab for the neighborhood. Make sure you are bringing the property up to where you can sell it and keep your costs in line, at the same time, do not over rehab, in the long run this will cost you tons of money.
- Rehab for the masses, not yourself – cabinets, paint colors, design elements need to appeal to the masses, do not design the house for yourself. Try and be conservative in color selections. Know your market, what do other homes have that are selling quickly and include them in your designs. For example – higher quality cabinets, under counter refrigerators just to name a few small upgrades that can make you stand out and sell quicker depending on your market.
- Pete Rose rule – your probably asking what is this? Singles and doubles hitters usually strike out the least. Home run hitters usually strike out the most. Don’t swing for the fences. Be consistent (hit singles and doubles), don’t go for the home run all the time as you will strike out more often.
- Don’t rush to the market – complete the property, stage it, set the price and then show it. Too many investors list for sale prior to completion, they get “potential buyers” coming through the door giving suggestions, I see a lot of new investors listening to these suggestions, but these special requests can blow your budget and actually hinder your sale in some cases.
- Don’t lose money – easier said than done sometimes but some ways to kill your profit are : over rehabbing the property, not having enough cash on hand to complete the property as well as some reserves for the unexpected, buying at the wrong price, having too much on your plate – speed is your friend – too much on your plate can slow you down and get you to market in too long a time frame, over estimating your end sale price – too many “new” investors comp their end value based on the highest sale in the area – there is no guarantee you will sell at the highest price.
While I didn’t include it, make sure you have a good team behind you – Relators, wholesalers, contractors, lenders, as they will all be a vital part of getting your project from purchase to profit.
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