5 Tips For Completing A Successful Rehab
By JD Esajian on October 21, 2016
Pulling off a successful rehab is not as easy as it looks. You need to juggle many different things right from the start of the transaction. If you drop the ball in just one area it can be difficult to recover. Regardless of your experience level there are a handful of core items that can determine your success. These items happen in every stage of the transaction. If you buy a property that is not in line with the market all the good work you do may not make a difference. The same is the case if you don’t look at comparable sales or current listings. Finally you need to price the property right if you want it to sell quickly. Even though there is plenty going on in every rehab you should focus on these five areas.
- Look For Specific Property Features. Not every property you come across makes a good rehab candidate. One of the biggest mistakes many rehabbers make is focusing on the price instead of focusing on the property. The goal of any rehab is to buy a property where you can add value to. It is important to look at specific property features and characteristics before deciding to make an offer. You need to think about what an end buyer is looking for. A small two bedroom house may offer a deep discount but won’t do much in terms of increased value. You should look for properties with at least three bedrooms and ideally two full bathrooms. You should also look for repair items that will break the bank. Roof, windows and problems with the foundation can cost thousands of dollars to fix without giving you an equal return. If you don’t focus on specific property features you will be stuck with a property with limited upside.
- Property Types. The same is the case when looking at the property type. A condo in a good town may look like a good deal but on closer inspection it can actually be a headache. If your property type is too unique you won’t be able to find sufficient buyer demand. With reduced demand your property will either sit on the market for some time or sell at a reduced price. Condo sales are often based on other units sold in the complex. Even if you fix the property up to the nines it may not be enough to see a significant jump in value. You should also keep your eyes open for how your property relates to the neighborhood. If you are looking at a cape house in a market that is full of colonels you may be facing an uphill battle. When evaluating a rehab property you need to account for everything. Where the property is located specifically on the street and the property type can make a bigger difference than you think.
- Comparable Sales And Listings. As you consider which improvements to make it is essential that you look at comparable sales and listings as a guide. Every new listing is compared to what is on the market or what has recently sold regardless of the location or the market. Look at the features on homes that have sold quickly have and see if they can be added to your property. On the flip side look at the properties that have been on the market the longest. See if you can spot some trends that may be worth avoiding on your property. You also need to study the entire market and see which way it is trending. If values are on the decline you may need to adjust your listing price accordingly. If they have increased you should know that you may be in better position than you think.
- Get Everyone On The Same Page. As soon as you take ownership of the property you need to hit the ground running. Your goal should be to get in and out as quickly as possible. The only way to do this is by having everyone on your team on the same page. There should be no mistaking what you want and how you are going to do it. You and your contractor should sit down and go over the budget line by line so there is no confusion at all. You should go over the schedule with any subcontractors and talk about expectations and quality of work desired. Every day that you spend without working is directly costing you money. Before you take ownership you need to get everyone on the same page.
- Price Right. One of the keys to selling quickly is pricing the property right. As much as you may disagree buyers don’t care about all the struggles you went through to finish the project. All they care about is how your property stacks up against all the other properties in the area. If you price too high you will immediately lose a large segment of potential buyers and their real estate agents. Even if you only plan on listing too high for a couple of weeks the damage may already be done. Buyers that were interested will look elsewhere and real estate agents with new buyers will also do the same. By pricing right you can get your property sold quickly so you can move on to the next project. Conversely listing too high will keep your rehab on the market for weeks, if not months, creating a logjam in your pipeline.
Following these five tips will help your next rehab be more efficient and profitable