Rehabbing or flipping houses is a trend that is fast catching among real estate investors. The reason why it is perceived as a quick money-making machine is that it requires less initial capital, as opposed to real estate development, but promises very high returns. It means buying a cheap, old property and selling it at a higher cost after renovation.
However, flipping may quickly incur losses, if you cannot envision the project work, miss timeline, or worse, let the property sit on the market for long. A proper approach is required to make decent money in this business. You need to maintain a checklist, right from the beginning of the project.
A Rehabbing Primer
As mentioned earlier, to be a successful flipper, you need a defined method to go about your project. Many flippers are absolutely clueless about what they are going to do after buying a property. Before buying one, you need to know if you are going to invest in a fixer upper, or buy a derelict house that needs structural repair, as well.
A fixer upper allows you to complete the project fast, with only a few repair works. Structural repairs on a derelict property are a time-consuming process, requiring a large amount of coordination.
Besides, their costs are more in this case, due to lot of home construction work. Nonetheless, these properties are available at dirt cheap prices and may promise good returns. However, in the end, it may not be worth the effort.
Step 1: Locate a Property
Once you are clear whether you want to buy a fixer upper or a derelict, locating such a property becomes easier. Neighborhood is what gives the property its value after renovation; hence, a good locality is a must.
Inspect the neighborhood homes, as you will need to renovate yours on similar lines. The building material and exterior appearance have to be in harmony with the neighborhood homes; in fact, better than most of them.
Step 2: Secure Your Finance
You should have some idea regarding how you are going to arrange for the finances, even before you locate a property. Once you locate it, you will get a clear picture regarding how much money you will need for fixing it up.
House rehabilitation grants are available through many financial institutions. Besides, borrowing money from private lenders is another option. Investing your own savings, in this business, is a bad idea.
Step 3: Assign Contract and Decide Timeline
Next important job is to find a trustworthy general contractor and decide a timeline for your project. Assigning a general contractor relieves you from coordinating numerous workers at a time, as he relays you the information from time to time.
A contractor and his men are mainly responsible for getting work done on time. Hence, make sure that you appoint an eligible person for this very important job. You will also need to consult him regarding building materials and related costs.
Step 4: Finish the Exteriors First
Organize your work such that many jobs can be done simultaneously and independently. Starting with the exteriors, such as the roof and windows is a good idea, as they shield the interior and also invite attention from passers-by. This should help you in advertising your property.
Step 5: Get the Utility Lines Working
Next step is to get all the water and electrical lines functioning. Plumbing work should be completed, before you start any interior project. If any structural change is proposed, that may demand rearrangement of plumbing lines, then it can be done at a later phase.
Rip off the wood work, old cabinets, bath, carpet, etc. Hang the drywall in place and order new kitchen cabinets, furniture, etc. Paint the walls and install a new carpet.
Lastly, work on the landscaping of the house, and make it ready for your potential buyers. Market it aggressively when the work is in the last phase, so that you do not waste any time after completion. The investment and efforts can, indeed, prove to be profitable, if you do everything right.