Rehabbing and flipping properties is currently the most popular form of real estate investing. If you turn on your TV almost any night and you will find a show about flipping. While it is not as easy as it may appear on TV it is something anyone can do. There is no license or formal education required to become a real estate investor. A new investor has the same chance of getting their offer accepted as someone who has been in the business for years. If you have an interest in rehabbing but never knew where to begin here are four things you need to know before you get started.
Financing.The first step of any new rehab deal is financing. Lender guidelines for a primary residence are not the same for an investment property. Depending on the number of units the down payment will be anywhere from 20-30%. These funds need to be in an existing account for at least 60 days. If you don’t have down payment money you still have options. You can reach out to your friends and family and see who may want to financially back your project while you run it. You can also find many local hard money lenders who can help get you started. Regardless of how experienced you are all rehab deals start with financing.
Subject Property.Not every property makes a good rehab property. You need to find a property that you can get at a discount and needs work. Between the MLS and bank owned properties your real estate agent can be a valuable starting point. You should also keep your eyes open for any distressed property that may need work in your area. If you knock on the door, send a letter or give them a call you may be surprised at how receptive they are to selling. Deals will not fall on your lap you need to go out and find them.
Estimate repairs.One of the keys to any successful rehab is being able to properly estimate the cost of repairs. If you have never worked on a property before this can be very overwhelming. The cost of repairs plus the purchase price should be low enough that you can sell for a profit. If you miss or underestimate these costs you can end up losing money. It is a good idea to ask a contractor to come with you on your first couple of properties. The amount of work that is needed and the budget you allocate will often tell just how attractive of a deal it is.
After repair value.Getting the property at a low purchase price and doing the right rehab work doesn’t do you much good if you can’t sell the property. Before you even purchase the property you and your real estate agent should look at comparable sales to give you an idea of what you can sell the property for. This doesn’t guarantee it will sell at this price but it will give you an idea of what the range is. It is important to be realistic as to where your property stacks up with everything that on the market or has recently sold.
There are plenty of variables involved in each step of this process. The most important thing if you are interested in rehabbing is to start educating yourself about the business. With the right real estate agent and knowledge of the process you can close your first rehab deal in the next sixty days.