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Making The Most Out Of A Rehab Deal

Written by Than Merrill

As a real estate investor, closing deals does not automatically translate to success. If you are not diligent with your numbers, or you overpay for the property, any profits will quickly disappear. What you will find is that there is a fine line between maximizing profits and closing deals just to turn the pipeline over. If you can get the most out of every deal you are involved in, you won’t have to work as hard or close as many deals throughout the course of the year. It is the little things – that aren’t so little – that can make all the difference. Make the most out of a rehab deal by minding due diligence and trusting in your education.

Arguably, one of the most important steps in a deal is getting a property at the right price. The minute you overpay for the property, you start out behind the eight ball. Everything you do from that point will be done to compensate for overspending and could lead to making bad decisions. Getting the right price means not falling in love with a property that you may have had your eye on for some time. Once that happens, it is natural to want do to anything to get it. Set a firm purchase price maximum for yourself based on real numbers and be willing to draw the line there. This isn’t always easy, especially if you are slow, but quality is better than quantity when are flipping properties.

Paying the right price is as important as setting up the right financing for any properties you buy. While there has been a decrease in the number of lender programs, there has been an increase in the amount of hard money lenders available. Between these two outlets you should be using as little of your own money as possible. Once you have to dip into your personal accounts, you start cutting unnecessary corners that can jeopardize quality and profits. This doesn’t mean that you shouldn’t watch your budget if you are using private financing, but if you know you have access to funds it will let you do what you need to do to do the rehab right. You may make a little less margin on every deal, but the deals you close will be far more profitable and you can do more throughout the year.

After you acquire the property, what you do next is critical. You can get an unrealistic portrait of the rehab business from what you see on TV. The reality is that even if you know what you are doing, it may not be enough. It typically takes many deals before you fully feel comfortable with the nuances of flipping real estate. During this time, you should lean on your contractor and the team around you. You can be involved in the process, but let a contractor handle the day to day work on the property. Getting the work done and getting it done right can make all the difference in getting the property sold for top dollar. Buyers or renters will often look at the quality of the work as well as the fixtures used and the often overlooked items in a property. Additionally if you spend all of your time rehabbing one house, it won’t leave too much time to find new ones. If you have to spend time after you close looking for your next project, you only do so many deals throughout the year. The work that is done is the showcase of your property. Leave it in the hands of the professionals.

All real estate is a numbers game. In addition to looking at the right numbers on every prospective deal, you need to give yourself enough deals to choose from. This means working with the right sellers and spending time going after deals you think are profitable. Short sales are still taking many months and certain foreclosure deals are full of obstacles as well. Finding motivated sellers and knowing how to present the offer will give you a greater chance at finding good deals. It can be a real setback working months on a deal only to have it fall out in the 11th hour. You can reduce your chances of this happening by finding sellers that really want to sell and working with them throughout the process.

Working with a realtor that knows the market and how to get properties sold quickly is a major asset. The process of getting it sold will begin before the house is actually finished. Time is money with every rehab, especially if you have a private money loan that needs to be paid. If your realtor doesn’t know the market or wants to price it too high, it will sit idle for months and cost you money. With the right amount of advertising, exposure and expertise, a good realtor can have offers shortly after the first open house. Your realtor may be great at finding properties, but there is a different skill set for selling them. Use the best realtor that can get your property sold at the highest price as quickly as possible.

There is a lot that goes in every rehab deal. The more detailed you are in every area, the more successful you will be. These are the little things that make all the difference in almost every rehab.