Frightened by what lurks in the halls of your newly purchased property? Are you terrified of the possibility of removing dry wall to see that you have a termite infestation, pipes broken in your plumbing, or having to completely rewire your house? At this point, I’m sure you’d rather the property just have ghosts. Don’t stress out though. These issues can all be avoided by doing your own homework and paying attention during your walk through.
Know your rehab. One of the biggest mistakes I see beginner investors make is relying too much on a contractor’s bid to feel safe about a property’s repair cost. Don’t get me wrong, it’s ALWAYS safer to have one, heck even three bids, but “doing your own due diligence” is about a lot more than just running comps. Make sure you feel comfortable taking rough estimates on what repairs are going to be. Meaning, have a broad scope of knowledge on what items and materials cost. I would HIGHLY recommend taking a trip down to your local home improvement store and record the cost of materials. This way, when you are walking through a property, you can reference back to your cheat sheet until you know the prices by heart.
“Make sure you feel comfortable taking rough estimates on what repairs are going to be. Meaning, have a broad scope of knowledge on what items and materials cost.”
Don’t be afraid of the big things. I can always tell when I am working with a first time investor by how they react to foundation repair. It is one of the scariest things to imagine a house can have, especially when you are walking through and it feels as if you are rolling down a hill. However, once you start to realize that a rehab is nothing more than a numbers game, you can begin to let the math do the work. Essentially, you are just leveling the house; and it’s a common problem you are going to run into when searching for investment properties. The experienced investor will get excited once he hears the house will need foundation repair, because this will scare the less educated off and most likely lead to no competition when buying the property. This same principle goes for your roof as well. Believe it or not, a roof is one of the easiest and fastest things to repair; most of the time, it can be entirely replaced in a day. Remember, this is an investment, and it always comes down to the bottom line. Your property could have a wild termite infestation, water damage all along the ceiling, A/C that is completely shot, or a chimney falling away from the house, but as long as it fits within your repair cost, then it is a good investment.
“Remember, this is an investment, and it always comes down to the bottom line.”
Have a guy in your back pocket. Nothing feels better than knowing the guy who offers the best prices around. The real estate industry is all about connections and the one with the most wins. Finding these people is the difficult part, but once you locate a few your net worth goes up tremendously. I can’t tell you how many times I’ve overheard an investor quote a price for piers, or flooring, and have me convinced they were being down-right robbed. Knowing you have quality connections in your corner that can handle anything from a 6 inch separation in foundation, to properly flooring your 1,500 sq/ft house, is going to be essential to your success.
After your rehab is completed, you will have an updated property ready to be sold. Now it’s time to get that puppy listed, and cross your fingers for low days on market.