Tips for Starting a Rehab Project
Many people make the mistake of thinking that any property on the market is perfect for a rehab project. This is not always the case as no two properties are the same. To assist you with your decision making process, find below short list of tips to help you figure out which property is right for your rehab project.
Pick the Right Location
Location is key. If the home is located in an undesirable area or in an area with little to no demand you aren’t going to have good luck re-selling the property. Since you are trying to buy low and sell high you have to take a harder look at the location in and around the property. Do your research to find out crime rates, foreclosure rates and what’s nearby. Are there good schools, shopping, and a highway nearby? Then you might be in luck. Keep in mind that most buyers will also look at the properties near the for sale property for comparison; you need to be sure the area isn’t too run down around it or your potential buyers could move on. You should make sure that you’ve researched the neighborhood and markets so as to be able to pull in more potential buyers.
Will there be Demand?
You may like the unique build of a particular property, but that doesn’t mean potential buyers will like it as well. Look for properties that will have high demand, which may mean looking to the cookie cutter properties; if it turns a profit it shouldn’t matter much. Floor plans, structure, and backyard space are all factors for many buyers and they are unfixable for the most part so make sure to take these all into consideration as well. One way to make sure you pick a property that will be in demand is to look at what is selling in the market to see what people are naturally gravitating toward and try to find a property similar or ways to make your property match in some ways.
What is the Timeframe?
How long will it take to acquire the rehab project, do the work, and close on a sale? You should have some idea of how long this entire process will take for each property; some will take longer and that’s okay. However, if a property looks like it will take several months just to acquire you may want to keep looking. In the time it takes to acquire this one property it’s possible to do everything needed for two houses, so it’s up to you which direction you want to go. Look at what’s on the market currently and consider going for the properties that have been listed for some time. Chances are the seller will be ready to get rid of the property quickly so the acquisition will be much shorter.
Is there a Profit to be Made?
Your ultimate goal is to turn a profit, so you should look for the properties that you can add value to and not the ones that you will sink money into without much change to the profit. Compare the acquisition price, cost of work and added value from it, and the end sales price, as these three major areas will tell you if you are going to make a profit. If any of these numbers seem weak or well below what you think you should be making you might want to look elsewhere.
Since no two properties are the same it is vitally important to your business that you do your research before you dive into a rehab project. You’ve got to be certain you are buying a property in a good location that’s in demand and that will turn a profit. If you don’t choose the right rehab project you could be going down the road to a mess. If you pick the right one you will be successful in your endeavor. These tips should help point you in the right direction to continue your research and give you some idea of what this process entails; it’s up to you how you will move forward.