LEARN ABOUT REHABBING HOUSES
Rehabbing houses is one of the most lucrative real estate investing techniques. Learn proven strategies and techniques to maximize your profit.
How do you start rehabbing or fix and flipping houses?
One of the most lucrative yet costly projects a real estate investor can try is a rehabbing house. This profit center can be both intimidating and challenging, especially for novice investors. It includes purchasing a property, renovating it and selling it for full market value. Rehabbing or fix and flip, requires an attention to detail and experience to master, but it remains one of the more profitable investment opportunities in real estate.
Rehabbing a house takes time, working capital (your money or other people’s money) and experience. Rehabbing is definitely not something you want to jump right into, investors are encouraged to be diligent before getting started, including other investment strategies. While rehabbing can bring profitable returns, it’s a complex exit strategy that should not be taken lightly.
What is rehabbing houses?
A house rehab is a process of taking property, restoring it or improving it with upgrades. This helps boost the property value and improve the overall condition without drastically changing the floor plan. According to Homeadvisor.com, the national average for this type of undertaking costs $39,567.
Before beginning a real estate rehab, it’s important for real estate investors to understand the complexities of rehabbing. There are three categories of rehabs: personal rehab, rental rehab, and a fix and flip. It’s important for an investor to understand how each approach can generate a different profit as well as the costs of the project.
House rehab Vs fixer upper
The best way to think about a house rehab vs fixer-upper is in terms of overall work and cost: a house rehab is typically a more comprehensive project when compared to a fixer-upper. House rehabs will involve renovating the property and making larger changes, like fixing electrical, plumbing, or roofing issues. A fixer-upper typically focuses on cosmetic changes that can be made quickly or at a lower cost than a full rehab. A good rule of thumb is that if someone can live in the property during renovations, it is most likely a fixer-upper and not a full house rehab.
How much does a house rehab cost?
A rehab project can cost anywhere from $20,000 to $75,000, or more. To find a rehab project within your budget, start by assessing how much capital you have access to. This will help you narrow down the size of the property and rehab you choose. The next step is to begin touring potential properties and keep an eye out for which projects will need to be completed to renovate the property. From there, investors can find the specific cost of rehabbing the house. Here are a few expenses to consider when planning a house rehab budget:
- Materials: Estimate potential repairs during the property walkthrough in order to look up potential material costs. These include new countertops, appliances, paint or flooring, and any other supplies necessary to the project.
- <Labor: The most essential part of a rehab project is a good team. Not only will investors need a contractor, but they are likely to need an attorney, real estate agent, and lenders. Each of whom will be associated with various costs.
- Purchase Price: The initial purchase price of a property is the foundation of a rehabbing budget, as it influences everything from the loan required to the future return on investment.
- Lender Fees: Depending on how the property is financed, different lender fees could be required. More of then than not, these will cover paperwork, title searches, and other costs associated with the purchase of a property.
- Ownership Costs: Do not forget to account for holding costs when estimating the overall budget. This includes the costs of utilities, property taxes, and overall upkeep during the rehab and selling process.
- Staging: After the rehab is complete it will need to be staged and photographed to sell. Investors should always include this in their initial budget to avoid being caught off guard by extra expenses once the rehab itself is complete.
- Permits: The permit process can influence the cost and timeline of a house rehab. A permit will typically be required when adding to the square footage of a property, parking a dumpster for old materials in the street, and when changing utilities to the property.
How long does rehabbing a house take?
Rehabbing a property can take anywhere from six weeks to six months. There are several factors real estate investors can use to determine how long a project will take including the size of the property, the specific renovation projects, and your team of laborers. To get a better understanding of a rehab project, look at each of these factors before purchasing a property. It can also be a good idea to research how quickly properties are being sold in your market, this will suggest how long it could take to sell the property once the rehab is complete.
How to start rehabbing houses?
To start rehabbing houses, real estate investors should research the local market, assess their financing options and build a real estate power team. Start by getting the proper education and networking at events in your area and getting to know other real estate professionals. Many new real estate investors invest in an experienced mentor who can provide guidance and help them become familiarized with the overall work involved in a rehab and searching for ideal properties.