Five Rehabbing Mistakes That Every Real Estate Investor Must Avoid

Five Rehabbing Mistakes That Every Real Estate Investor Must Avoid


For many real-estate experts, real estate rehabbing is a sound investment strategy that generates a great return on investment. If you know what you are doing, the rehab industry can be extremely lucrative for you, especially in the long run. Real estate rehab is a strategy that involves combining maintenance, financing, construction, and interior design in order to generate the greatest return on investment. Veteran investors and even newbies can make a lot of money from buying distressed homes, rehabbing these properties, and reselling them at a handsome profit.

If you are a real estate mogul, it is a great way to earn some passive income. Also, it can be an excellent opportunity for investors who are looking to expand and diversify their real estate portfolio. Purchasing a run-down property might not be the best idea for individuals looking to invest in the real estate industry for the first time; however, for many well-informed and experienced investors, a distressed house can just be the ideal diamond-in-the-rough deal. However, surprises are no fun, whether it’s your first or 100th flip. We all make mistakes, but those mistakes are even less “fun” when they’re self-induced blunders.

We will discuss five common rehabbing mistakes that all investors must avoid.


Five Rehabbing Mistakes That Every Real Estate Investor Must Avoid


  1. Lack of Planning

It may seem that you are ready to bring down the walls with the power tools and sledgehammer, but do not do it before you have a sound operational and financial plan. Regardless of whether you’re flipping homes, ranches, or farms, you need to plan for the unforeseen. You should find out if you need to address any structural issues before starting anything cosmetic. For example, you may run into several problems with property setbacks, liens, and encroachments, among others. You should address them first. You do not want to have to tear out new drywall that you just installed to rectify an issue with a pipe behind it.

  1. Picking the Wrong Property

It is worth mentioning that choosing the wrong property could result in modest or no profit, even in a strong real estate market. Smart and savvy real estate investors conduct their due diligence to predict best where and when to purchase a property and know the amount to pay for it. Keep in mind that when you buy a property to flip, you are committing to the neighborhood as well. If you splurge money flipping a home that’s in a less-than-desirable neighborhood, for example one with a high crime rate, then you can have a hard time offloading it.

Also, you have to evaluate each investment property on its own merits and with the latest and appropriate data. Note that the data and figures supporting a property must supersede any affinity you may have developed for the property. Investors who do not do due diligence have been burned by homes they considered were in desirable and up-and-coming neighborhoods, only to witness property prices go south.

  1. Making the Wrong Property Renovations

If you are rehabbing for an upcoming home sale, you should consider the kind of return you will fetch on your investment. It is worth noting that some of the best flippers are often people who are in the construction business. These people know and understand which renovations are really worth making and which ones to forgo. While some renovations are likely to add considerable sale value to your property, others simply do not yield the results you may expect.

In most cases, upgrades to the bathroom, kitchen, and curb appeal tend to add value. On the other hand, spending money on pools or basements is not always a great idea. Check with your real estate agent when in doubt.

  1. Going Solo

A majority of prototypical real estate investors are often under the impression that they will save money on rehabbing by doing everything on their own. Going it alone may seem logical at first, as you aren’t paying for contractual labor. But this strategy can backfire.

If you are a new real estate investor and think you can easily flip a property on your own, you may be in for a big surprise. Flipping properties is a huge project that’s made up of several smaller working parts. You might be skilled in DIY or construction, but that’s just a small aspect of what it takes to successfully rehab a home. You should get help and surround yourself with an expert team of real estate agents, contractors, attorneys, and interior designers to get the best results.

  1. Over-Improving

You should know that over repairing and over improving a property is one of the most common mistakes that many eager and well-meaning home flippers make. Usually, a general rule of thumb is bringing the property up to neighborhood standards. There are specific repairs and upgrades buyers will accept not being completed. Note that these “non-essential” repairs are painting, basic cosmetic clean up, minor carpet replacement, and some other light to moderate aesthetic or cosmetic damages. You can perhaps seed your backyard and skip the sod. Another option is to go for lower cost cabinetry in the kitchen and tile in the bathrooms.

Although buyers will still look for spacious outfitted closets and even lower-level living space, note that they will not notice the difference between a bathroom tile that’s $4.00 per foot and $7.00 per foot. While you would like to produce the best possible product, you will have to temper your expectations.

Final Thoughts

Experienced and successful rehabbers know that flipping properties is a serious business. If you know what to do, it is financially rewarding, but you may end up losing your investment if you make the above rehabbing mistakes.