This is advice mostly to new to Real Estate Investors who are thinking about getting into the Rehab Business!!! Wholesale, Wholesale, Wholesale!!! This should be your mantra the entire first year maybe two.
I am sharing this with you out of experience, I am a serial rehabber! The problem is I love houses and I am an electrical engineer by education so I love to fix things or at least try to 🙂 There is nothing wrong with rehabbing properties once you have the capital, the crew and the market and construction knowledge in place but understand that rehabs are serious projects that have to be completed correctly not only for safety reasons but also to meet the current market demands of whatever market the property happens to be in so you can get that rehab sold, make some money and move on to the next one.
I have attached a video so you can see where things can go wrong. You walk through the property and you get these great ideas and you start to fall in love with it. I have been in the business for going on 9 years now and I still suffer from this. It really needs to come down to money, how much of a return will you obtain on the money you are putting into the rehab. This is a good ratio to consider. You can look at your property like a fixed cost but your rehab money is the higher risk portion of your investment so if you spend $80,000 on the rehab will you make 50% on the rehab investment portion?
I like to make at least 50% of what I spend on the rehab on large projects and I try to make between 50 and 100% at lower rehab costs say between 15 and 30,000. It just doesn’t make a lot of sense to rehab large urban projects where you have to rebuild, floor joists, perform extensive tuckpointing and spend 4-6 months rehabbing a huge house if you don’t see the return you are looking for on that extensive a rehab and that is why I was able to pull myself out of rehab mode on this one and go ahead and wholesale it to a local investor who is running with the rehab project from there.
If you are taking on your first rehab I recommend something very managable, don’t let your curiousity and interests cloud the ultimate path here which is to make money so we can live a great life and sleep at night!!!
