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Maximize The Returns On Your Next Rehab Deal

Published on Monday - January 18, 2016

Rehabbing is currently the hottest trend in the real estate market. What many investors often forget, however, is that it takes a lot of work to pull off a successful rehab. You can’t just buy any property, make some improvements and sell for a profit. The goal is not to simply finish the project, but rather to maximize your returns. Why else would you want to invest in a rehab? Of course, if you want to be successful, you must first understand a few basic rules. Even a few missteps can lead your deal down a hole that there is no coming back from. On the flip side, focusing on a few key areas can help turn an average deal into a home run. Here are some tips to help you maximize the return on your next rehab:

1. Do your homework: Never get involved in a deal you regret. While simple in theory, we don’t always have the pleasure of accurate foresight. There are times when troublesome items will come out of nowhere, but these are the exception rather than the rule. In most cases, if you spend some time researching the property and the market you will have a good idea of what you are buying. Before you make an offer, you need to know everything about the deal. Even if the deal is time sensitive, there is no excuse to neglect the due diligence process. It is not a stretch to say that you are making an offer that could change the future of your investing business. One bad deal could set you back months. Fortunately, gathering information is easier than ever. You should be able to find out everything you need in the course of just a few hours. Always remember, there is nothing wrong with passing on a deal that you aren’t comfortable with. And the only way you should be uncomfortable is if you neglected to mind your due diligence.

2. Make a smart offer: One of the goals in making an offer is not only to get it accepted, but to do so at a price you appreciate. That said, you need to know your seller. Certain deals may require you to offer a little more to blow the seller away. Other deals, where there is less competition, may not require any extra effort at all. Making a smart offer means getting the property at a price that you can live with, and with enough room to make a profit. There will be times when you need to negotiate. Good negotiating skills can help get you the property 10-15% lower than you may have otherwise. Research the seller and make offers that make sense for you.

3. Do the right work: As we mentioned earlier, not everything you do to the property has a positive impact. The best rehabbers understand the market, and will put the right work in. The right work doesn’t necessarily mean the most expensive either. Putting a hot tub on the deck sounds nice, but is it really what your prospective buyers are looking for? You need to strike a balance between what is available in your market, all the while putting your personal touches on the project. You also need to keep an eye on your budget, and make sure you are doing things in a cost effective manner. End buyers are not concerned with the initial condition of the property, only the finished product. They are going to judge everything, from the kitchen to the living room. Before you do anything, take some time and think about whether or not you are doing the right work.

4. Have a good team in place: The best rehabbers understand the value of a good team. They understand that there will be plenty of moving parts on a rehab project, and they need good people around them to be successful. Everyone from your electrician, painter, general contractor and real estate agent are important. You never know what a buyer is going to notice about the property. Something as small as how the trim is stained can be the deciding factor. This means taking your time when hiring everyone that steps foot inside the property. Not only will this make your property better, but it will make your life easier as well.

5. Focus on the sale: If you have used hard money to finance the property, every day you hold it is costing you money. Time really is money. There are differing opinions on when you should start advertising the finished property, but as soon as you are comfortable, you need to go. Utilize social media and listen to the advice of your real estate agent. As difficult as it may be, you should remove your emotions from the equation and list for the right price. The right price will get your property sold quickly. From the minute you start the project, you should have a clear vision of what you want to sell for and when you want it listed.

By maximizing your profits on every deal, you don’t have to close as many throughout the year. Use these tips on your next rehab deal, and you will see a difference.

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