Wholesaling and rehabbing are both great ways of flipping houses for large real estate investing profits. However ‘pre-habbing’ is a new hybrid way of real estate investing that increases profit spreads while keeping a fast momentum and avoiding the liability and expanse of full rehabs.
One of the main roadblocks to bigger profits and flipping houses quickly to others who will rehab them is that many homes just look in terrible condition when you get them. True much of this is purely cosmetic. However if a home is full of trash and the yard is a disaster then it is hard for rehabbers to really envision the end product and it looks like a lot more work than it really is. This also makes it hard to justify the price.
To capitalize on this niche real estate investing strategy savvy investors are finding properties with great rehab potential and are ‘pre-habbing’ and cleaning them up. At a minimum pre-habbing should include cleaning up the exterior and emptying the home of any left over junk. In some cases you may want to strip the property out even further, leaving a clean slate. This opens the property up to those that are rehabbing, making it look easier and helping them to better envision what needs and can be done with the property. You will find that on average for every dollar you spend in pre-habbing you will three returned.
This should normally only take you 1-3 days to complete enabling you to keep your momentum. However pre-habbing work should not be done until you close on the deal or you face just adding value to the property for the current seller. In some cases it pays to take this real estate investing strategy even further and do work that you know you can get done far cheaper than most rehabbers or at least have plans drawn up or collect quotes so that the deal looks more attractive and can be sold quickly.