property rehabYou did your research, found the property and successfully closed on your purchase. Now it’s time to change hats and get to work rehabbing the property for sale.

Each part of this process is an expense in both materials and labor and will gradually eat away at your final profit and needs to be monitored constantly while repairs are made.

Not Too Big, Not Too Small

As you made your offer and analyzed your potential flip at the very beginning, you made your way through the property rehab figures and arrived at a number needed to get the house prepared to hit the real estate market.

But during your analysis and even after you bought the home, how do you decide what to fix and what to leave alone?

The minimum requirements are making sure the property is in good enough condition where a bank will make a permanent loan.

While you may have obtained short term financing to rehab the property, unless your buyers have thousands of dollars in their bank account all reserved to pay cash for your flip, they’ll be applying for a mortgage.

That said, unless you’re selling the property to another short term investor the minimum amount of rehab needed is getting the property qualified for financing.
The second consideration is making sure your property rehab conforms to others in the area.

A property that is the biggest and best in a neighborhood will be compared to other homes in the area by both the buyers as well as lenders.

If you buy a home that is a five bedroom, 5,000 square foot property when surrounding homes are typical three-bed, 3,000 foot properties, it will take longer to sell the home compared to having another three-bed, 3,000 foot house for sale.

The same notion applies when rehabbing the home.

It’s common knowledge that an upgraded kitchen is high on the list of home buyers but a kitchen can also be overbuilt, as with any other room in the house.

Do you want to install a Subzero refrigerator, Viking range and other high end appliances to go along with custom, granite counter-tops?
If other homes in the area have similar kitchens, then you should consider rehabbing your property to the standards set by surrounding homes. Otherwise, you’ll lose money on expensive upgrades, eating away at your profit.

Licensed to Work

If you’re handy around the house and know what a Sawzall is, you’re probably able to do much of the rehab work yourself. In fact, knowing how things break and how they can be fixed is a good trait for all real estate investors to have.

Easy rehab chores include things such as fresh paint and updating bath or kitchen hardware.

But when you get involved in anything that involves a professional trade, you need to employ the services of your contractor. Yes, you can save money by making certain repairs yourself but sometimes the do-it-yourself routine becomes more costly when a professional has to repair your own “repairs.” In fact, electrical repairs need to be performed by a licensed electrician.

The same is said for plumbing or HVAC work.

Not only will professionals perform the work efficiently and as required, professional trades also make sure their work is up to the current building codes in the area. And even though you know how to replace roof shingles, leave that to someone who does it every day.

Your property rehab should have a dynamic punch-list identifying which repairs are to be done, when, and to make sure the remodel is on budget.

And because you included an additional 10 percent in your rehab costs, you’re not surprised when an unforeseen repair needs to be made.

Your contractor is one of the key players on your team. Your contractor is someone you’ve established a relationship with who depends upon your real estate investments for a steady income. Having a trusted, reliable contractor to shepherd property remodels through the process is considered one of the most important pieces of the flip-fixing puzzle.

fixing propertyThe Look

Perhaps the most cost-effective trick in getting the most out of your property rehab work is establishing an attractive curb appeal. The curb appeal is what people see as they drive by the property or walk up the sidewalk to inspect your home for the first time.

Curb appeal means a mowed lawn, some landscaping and a fresh coat of paint.

It’s a clean porch and sparkling windows and if the house doesn’t need a new paint job, an exterior power-wash will rid the property of accumulated dirt and anything hanging onto the property that doesn’t belong there.

The look also means a fresh interior that welcomes potential buyers into your flip that encourages their emotions to get the best of them and make a full price offer on the spot!

Your real estate agent is a professional “home stager” that can prepare the home’s façade for a pleasant curb appeal as well as arranging the interior of the home to make the property appear larger and more attractive to buyers.

Selling While You Work

Immediately upon closing on your flip, make sure your property is listed in the MLS as well as planting a For Sale sign prominently in the front yard.

People who drive by a home that is currently being remodeled will always slow down to take a closer look. Make sure your agent’s For Sale has a rider beneath that says, “Newly Remodeled” or similar catch-phrase indicating the home will soon be remodeled but are taking offers while the property is being upgraded.

A mistake is made when investors keep their property rehab project a secret until the project is complete.

Don’t do that; encourage offers while you’re rehabbing your flip. There’s nothing better than having your flip sold for the price you want before the repairs are even made.

David Slabon