Friday, March 11, 2011

Real Estate Investment Strategies
for Rehabbing Houses

As you are starting out on your road to become a successful Real Estate Entrepreneur, you are going to eventually purchase a property that has a lot of

equity but you need to extract that it from the property by repairing or rehabbing it. One of the best ways to generate cash as an investor is to rehab properties for resale.

Buyer Beware!

Rehabbing can make you money but you as an investor have to be careful. Two of the biggest mistakes made by 1st time rehabbers are TIME & MONEY.

Although your actual time commitment is minimal, these projects from purchase to sale, take a significant amount of time. To finish your rehab project, plan six months to one year. That means you may not see any profit for a while. Hopefully, your projects will finish much faster, but mentally commit yourself to problems and delays that will hurt your projected completion date.

The second negative is MONEY. Unless you have a partnership arrangement, you will have to come up with money for these projects. MREIA consistently puts $10,000 to $20,000 in repairs alone into a house. Add that to your purchase price and you can see you'll need access to quite a bit of cash. Plus, that money could be tied up for 180 days or more.

These negatives aren't anything you can't overcome. You'll see how important it becomes to have a well thought-out plan to minimize the negatives and accent the positives of rehabbing a property.

Estimate Repairs - Rocket Science?

Once you have found a property to rehab, you need to get a good, not great, idea of how much money you are going to need to repair. Dealing with sellers they always place the repair costs to a minimum. What ever amount they say I double it. Estimating repairs isn't as difficult as you might think. Once you rehab a couple of houses, you'll know what you're repairs will run. This is where a check or punch list becomes invaluable.

Your Finished, NOW it is time to get PAID!

The marketing strategy is to develop several plans to help you get to your objective - MONEY now or in the near future. You, the rehabber have several options:

  1. Rent It!
  2. Sell It!
    • For Sale By Owner (FSBO)
    • Hire a Realtor.
  3. Lease Purchase It!
    • Combination of Renting and Selling!

Rehab Process Outline Here it is:

  1. We are going to find a distressed property that has mucho equity!
  2. Buy it using a formula (MAO Rule) that calculates your holding & rehab costs.
  3. Rehab the property to bring it back to neighborhood standards or beyond.
  4. Develop a marketing strategy that will attract either an investor or owner occupant.

Written by +Bob Burns.


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