Over the years, real estate investing has increased in popularity due to several reasons, such as a stable return on investment. Two of the best real estate investing strategies are investing in buy and hold properties and flipping houses. People make a lot of money flipping houses every day; however, the secrets to long-term success often start with knowing what you are doing.
A rental property rehab is a great strategy as it allows savvy investors the opportunity to not just increase the market value of a property, but to benefit from stable monthly cash flow as well. However, despite what HGTV or Instagram has you believe, keep in mind that flipping houses is often more hustle than glamor. However, investing in fix-and-flip real estate is incredibly rewarding if you play your cards right.
If you are a real estate investor, here are four rehabbing tips you must know.
1. Perform your Checks
One of the first things you have to do is check the prospective property so that you can easily assess any works that may have to be performed. It is worth noting that buying the property “sight unseen” or making an impulsive or hasty purchase puts you at serious risk. This is why an early inspection is essential in order to assess the physical condition of the property and budget for repairs. You have to be able to accurately estimate costs and determine whether or not any permits are needed for works required, hence performing a thorough and comprehensive check and walkthrough is a crucial part of this process.
When you perform a walkthrough, you should look at four important things, including roof, plumbing, structure, and electrical. Looking at these important areas is crucial, as these may end up being extremely costly. It is also important to consider all costs. For example, when you are estimating tile costs, do not only look at the $3-per-square-foot price tag on these tiles, but also consider the cost of mortar, labor, grout, and tools. Do not forget insurance, taxes, mortgage payments, marketing costs, and real estate commissions as well.
2. Choose the Most Suitable Neighborhood
When you are strapped for cash, the tendency is to simply assume that an inexpensive property anywhere is an excellent option. It is not. When you are searching for houses to flip, you should purchase an old house in an up-and-coming or a highly respected neighborhood. You want a safe neighborhood, where people want to live, and values are rising. You can easily figure out the lay of the market by speaking with a competent real estate professional or doing your own research.
The properties in most of these neighborhoods will already be priced above average selling value; hence, when you renovate them prudently with structural repairs and new appliances, they are likely to sell for even more. It is worth mentioning that not every property makes a good flip. Only because a property is priced low does not mean it is a good value. Just remember that you cannot force a neighborhood to be good.
3. Don’t Make Unnecessary Improvements
Making unnecessary improvements to a property is a common rehabbing mistake. Be sure only to fix what is necessary. This is because over-improving a property will not provide you the desired return on investment (ROI) that you’re hoping for. While there is a wide variety of new and trendy technology at your disposal, like smart security systems, make sure to stay realistic and within your budget.
If your main goal is to flip a property as soon as you can, do not bother with significant renovations and potential money drains. For example, if you buy a residential property in a neighborhood where most other homes have linoleum floors and laminate countertops, you might not get your money back if you add expensive wood floors, custom wood cabinets, and marble countertops. Always keep in mind that this is a business, and you’re not renovating your house in order to convert it into your dream home. On the other hand, if you’re fix and flipping a multimillion-dollar property, for instance, it is an exception to our rule as this type of flip needs to be impressive.
4. Know the Legal Environment
Apart from having sound knowledge about the neighborhood, you must invest some time in thoroughly understanding and familiarizing yourself with local laws and regulations, particularly when eyeing foreclosed properties. Also, make sure that you take enough time to look at relevant permit requirements for the repair work that has to be carried out. It is worth mentioning that there may be some changes in the industry that can have a considerable impact on your ability to buy and sell a property, and being caught unaware could be very costly.
Final Thoughts
Rehabbing is certainly not for the timid. It often takes a huge investment in money and time. However, by following the above tips, you can boost your chances of rehabbing and selling your investment properties with more speed.