Dos and Don’ts of Rehabbing an Investment Property
Interested in rehabbing a property and growing your investment portfolio? It can be a great deal of work, but for some, the payoffs are well worth it. Here are some dos and don’ts to keep in mind as you contemplate your next project:
Do know the market. This is true of any buyer or seller, whether a private homeowner or a real estate investor. When it comes to rehabbed properties specifically, take a look at other like homes/buildings in the surrounding area. What do potential buyers value most? What do they need and want? This allows you to invest in a targeted manner and budget appropriately.
Do crunch the numbers. Hope you like budgeting! You’re going to need these skills for every step of the process. First, of course, is purchasing the property, but you must also factor in the costs of holding the property, taxes, insurance, extensive renovations, and ongoing maintenance until you find a buyer. Do not go into rehabbing projects blindly or with vague ideas of cost.
Do compare financing options. Shop around. Which lenders can offer the terms and conditions you need? Rehabbing loans can be quite advantageous; the key is to work with the right lender.
Don’t lose sight of reality! You may look at a property and see all of its potential. Great! But in some cases, the cost to bring that vision to life may be too great. If it eats at your bottom line or loses you money in the end, this is not a wise investment decision. Dreams are important, but make sure you keep your head grounded in reality.
Don’t stay on the surface. Sometimes, this is referred to as “putting lipstick on a pig.” Slapping a coat of paint on a building or power washing the vinyl siding does not constitute a “rehab.” You’re going to have to put in some serious work if you want to realize the return on investment you need.
Don’t DIY when you need a pro. If you’re handy, by all means, get to work. You can significantly cut your costs when you attack projects on your own. But when it comes to complex systems (here’s looking at you, electrical!), it’s best to go with a professional. Likewise with extensive structural and repair issues. You can always pick up a paintbrush after the pros have done the drywall!
Do vet your contractor – and have a contract. Don’t go with the lowest price option you found by browsing Craigslist. Get referrals from friends, family, or other investors. Contact contractors and ask for references – and then check them! Scour review sites and see what kind of dirt you can dig up. When you find the right fit, sign a contract after review by your attorney.
Don’t skimp on renovations – or go overboard. Kitchens and bathrooms are especially important to modernize, so don’t under budget for these rooms. Again, take a look around the neighborhood and see what features are sought-after. Make sure your property is up to par. But don’t go over budget making each room a Better Homes and Gardens showpiece. Save it for the kitchen and bathroom!
Do work with a turnkey provider. You can eliminate the stress, hassle, and expense of rehabbing by choosing a reliable turnkey provider. We’ve done the work for you, and now you can start generating income with a move-in, tenant-ready property.
Rehabbing can be rewarding; just make sure you consider all the angles before you invest.