I’m interested in buying some investment properties, rehabbing them and selling them. I’ve never embarked on anything like this, is there any advice anybody can lend or send me to?
ethomas,
Welcome!
Rehabbing is one of the most difficult aspects of the business if not the most difficult. It’s also the most profitable part of the business.
The reason it’s so hard is because managing contractors can be a real pain in the A**!!! Rehabbing in also VERY cash intensive. Make sure you have your funding in place and plenty of holding costs set aside.
ethomas,
Like Stacy mentioned, rehabbing can be an expensive proposition. Depending on your financial situation, it’s possible the first deal can take you down if things go wrong. If that’s not a concern, I’d say find someone who’s serious in the biz and hook up. Learn what you can and help in exchange.
Alternatively, you can buy some courses and go it alone, but I think that’s the slow road. I took that route myself, but don’t recommend it.
My first deal was a Preforeclosure/sub2/Rehab And I defintately pulled in a money and experice partner for this. Rehabs are great, IF you have the funds to cover holding… IF you have the right contracts for the contractors, which invariably seem to think 4-5 weeks=18… IF you know how to be a GC yourself… alot of if’s.
I partnered my first, and even my second, which is still up for sell, even partnering with a seasoned investor the contractors drug a 5 week project into 17. We are still ok since I bought right, but having someone experienced (And with GREAT References I might add) makes a difference. When things go wrong it isn’t my money, when we hold longer than we thought, I Am not making the payments ect ect.
After completing my first flip this week, I would suggest that starting out if funds and knowledge are limited. It was 70% Easier than a rehab! And I made about the same in profit from that then a LONG rehab that sat for a long time.
Hope this helps,
EThomas,
I have 22 houses that are in closing right now and in just about all I put up$4000-$6000 (depending on the furnace). I’m in Michigan so that’s a biggie up here. It’s worth rehabbing if you have the finances available. How I do a contract is by finding ordinary people who want money now and have good credit then I do it so they get cash out at closing. I hook them up with a “newbie” that wants to break in to realestate and make a land contract between them for the same price for which they borrowed at closing. It is usually 80% of the value. I win, the money hungry good credit person wins, and the newbie wins by renting it out so they make $100-150 a house. If the newbie sells it we all win and we can do it all over again. This process is a plus for the initial investor because he gets cash out quick and after 2 houses he can go start on 4. I’m in the process of doing the newbie thing to create cash flow for future investments and possibly more loans.
Good luck with your ventures,
Tim Elliott
Great info guys!
I mainly deal in Lease Purchase deals here in west Texas and have never dealt with the whole rehabbing idea. Just recently I have been noticing lots of empty houses in my area. Some are in pretty bad shape, but I have talked to some of these owners and they are willing to let these properties go quite cheap, but of course I don’t have all the numbers so maybe it’s not cheap. Anyways, if anybody knows anyone who would be interested in some of these properties just let me know. I am sure I can get these properties under contract for very good prices.
Cruz
Maybe I can help you…I just started take the pre-license real estate sale agent and I can get you leads from the MLS.
Hi ethomas, I’m in the exact same boat. So far, all I’ve done is talked to a buddy of mine who is a broker. I met with him for about an hour the other day and he printed me up an MLS of properties listing under $125K in a couple areas of town. Basically, his advice was to get to know an area of town real well, get a line of credit, and look for properties. So that’s what I’m doing… and I’ve got no idea whether it’s the right or wrong way to go about things.
It all can be confusing. This house is $55,000 and this one is $65,000. All appraisers do is try to get a price per square foot figure for the comps and compare condition. Obviously a new house will bring more per foot than a old run down shack next door. Get an idea of an average price per foot in the area you are looking and and adjust for condition and there you have it. I look for REO’s compared to a house for sale by owner. In my condo example the price would have been over $60,000 because they owed $56,000 on their home equity loan. The lender had to go to court and get a court order to sell and then post for foreclosure and then finally sold for $28,000. It appraised by my lenders appraiser for $56,000 as is but probably will only get that as all it needs is paint and flooring and appliances for a total of $3500. I was lucky ( right place at right time and offered the Realtor a full commission) and get this right after another buyer could not get funding. Banks and Realtors hate it when this happens and are asking for pre qual letters more and more today. I would love to show the next one a $100,000 bank statement to make it easier . Here I am rambling again. Going to garage sales now and maybe will even buy a garage too.
Read this book, first, to see if the rehabbing field interests you:
Buy it, Fix it, Sell it, Profit! by Kevin Myers.
You can make a ton of money in rehabbing, but it’s a niche like any other with it’s own unique skill sets, knowledge bases, tricks, etc. First see if it’s a game you want to play.
Good luck,
Hal
I just finished my first rehab and had it under contract in two weeks. I went over budget by 50%, but had other funds to back me up. Always add 2k to 5k to your budget for the unforeseen. This is what happened to me, and I knew better.
That would be a good point of perspective . It has commonly been an approach now to make your investment grow not just for short time but for long term eventually.
Best advice would be to make sure your budget is flexible, because you can easily go over time and money wise. As long as you can afford to hold for a length of time, and you have the know how to rehab suitably for your perspective clientele then this can be a successful undertaking.