Top Mistakes Rehabbers Make…and How to Avoid Them
If you’re paying any attention to the real estate market in your area, you know there are some really good deals out there, especially on homes that have what I’ll call “deferred maintenance”. You may be tempted to jump in with both feet and take on a rehab project, with the hope of a significant profit for your time and investment.
Before you buy that “fixer-upper”, here’s some mistakes to avoid.
Mistake #1 – Buying a property in an area you’re unfamiliar with.
It’s important to pick a property close enough to your home that you are able to be on-site regularly to manage the work being completed. Strong leadership at the project is the key to meeting deadlines and coming in on budget.
The additional benefit of having a project close to home is the ability to better determine value, especially after repaired value, in an area familiar to you.
Mistake #2 – Failure to do the Proper Inspections
Get familiar with the “majors of rehab.” These are the items that can cost you big dollars on a deal, things that will make or break a deal, and things that can take you right out of the real estate game. The majors of rehab fall into these five categories:
1. Roof
2. Structure (foundation)
3. Electrical
4. Plumbing
5. HVAC (heating, ventilation, and air conditioner)
Work closely with a qualified home inspector to sort out what the deficiencies are in the home, determine if the necessary repairs and/or replacements fit within your profit goals. Quailfied contractors are also a great resource to understand the full scopt of a project. Find a contractor who is willing to work with you as you look at potential opportunities. Treat this person well. They are one of the keys to your success.
Mistake #3 – Failing to Negotiate for Maximum Profit
At a minimum, consider these four things when negotiating your contracts:
1. Price – Remember to ask “Is that the best you can do?” Never give sellers what they ask in the first negotiation.
2. Deposits – Always give the deposits to a third party or escrow company. Never give funds directly to the seller.
3. Closing – When is the closing? Set a firm date
4. Occupancy – Live by the rule called “cash for keys.” That means never, ever give sellers a single penny until they have left the house and you have taken over occupancy.
With the proper planning and strategic relationships, rehabbing can be extremely rewarding and lucrative.
Smart Move Realty is a real estate brokerage located in Maple Grove Minnesota.We specialize in both residential and investment real estate. Our website, BankForeclosureMN.com is a cutting edge tool used by investors throughout the Twin Cities metro to locate, research, and make offers on bank owned properties in the Twin Cities. Whether you are looking for rental property, fix and flip solutions, or just a great deal on your next home, Smart Move Realty and BankForeclosureMN.com are your one stop source for Creating Wealth through Real Estate Investing. For more information, call us at 763-494-5545 or email us.
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