I am kinda new to investing but not really. I did a deal before in IL. It didn’t turn out so well but I learned exactly what I did wrong. I basically was looking to flip in a rental neighborhood. It was a very rough neighborhood. (an investor ended up buying) Sorry for the long mail
I don’t know why the heck I would think anyone would want to but there.lol But believe me it wasn’t a funny process.
I can laugh now though. I have my bearings back and I’m in AL now with a HML in place. I’m ready to go again. The rehab team we had was great. HML was terrific. Realtor excellent. But there was nothing we could do to make any1 move there.
Anyway, my credit score is lower now because of that deal so I can’t even think of a refi. I don’t want to “wait” with the flipping thing because that is a headache waiting for a buyer. So what would you do. Also, if I’m not mistaken, AL is a serious buyers market. Any thoughts?
you can make a lot of money rehabbing, but it requires the right skills: excellent project management, adaptability, ability to fund holding costs. Helps if you can do-it-yourself to save money. Probably a few others I left out.
If you don’t have these skills, you’re probably better off doing rentals or assignments or something. There’s still plenty of room under the real estate umbrella to find something you’re comfortable with and good at.
Personally, I like rehabs; a real feeling of accomplishment.
My first few rehabs were the toughest, especially the very first one.
First I had to find the deal of the decade. I was also in a buyers market so I had to be prepared for extra holding costs. It took me 2 months to find the property. After writing an earnest money check I was left with less than $200 dollars to my name. Luckily I found a HML who would include closing costs and holding costs into the L/A provided it did not exceed 65% of the ARV.
I paid myself $5k out of the loan as a project management fee. This was just so I could pay my rent and eat until the property was sold. The property was a POS. It had broken windows which let rain and snow in for years, ofcourse creating mold between the floor joists.
My friends were the demolition and landscaping team. I hired contractors to do everything else. I was marketing the property and checking in on the contractors all day long. I knew if I couldn’t sell the property soon after completion that my holding costs would quickly exceed the 65% ARV set by my lender. Looong story short, I ended up selling the property within 2 weeks of completion and got my check from closing 3 weeks after that.
Moral of the story- Find the forgotten properties in retail neighborhoods and bring them back to life. Start the pre-sale the second you own the property. Everything else falls into place if you refuse to accept anything else. You’ll never be totally comfortable at the start of anything, but you’ve got to start somewhere.
I’m working on my first rehab and so far it’s not that bad. So far it has been a lot of phone calls and getting some contractors/handymen into the house to give me estimates.
I have a full time job so I can’t do all the rehab work myself, just oversee things.
Ah. thanks a lot for replying. Rehabbing does kind of scare me.
Inexperienced rehabbers call me all the time begging for advice on how to get out of trouble. The problems seem to always start with not finding a good enough deal and a lack of funding because of it. They give up on their property search and settle for a mediocre deal. Because they can’t get as much money from a lender for repairs, they convince themselves that they will; A) have enough money and B) will be able to sell it quick enough that they won’t have holding costs. They get half way through the project and have their credit cards maxed out, bank accounts empty, and no one will give them any more money. This is where I step in and buy the property for exactly what they have in it and finish it.
When you are inexperienced and/or have no money. You need a big buffer zone that will allow you to make mistakes and still come out okay. To do this you need to find a good enough deal that any lender would be more than willing to give you a surplus of money to complete the project.
Luckily you learned something from your bad deal. If a RE agent led you to that deal, I would say he/she was not very savvy in locations and resales.
The main criteria is to have patience to find the right deal - that works. If the numbers don’t work, pass on the deal - there will be another one coming soon.
Rehabbing can make or break you - so do your homework in this area as well.
Good luck on your next deal.