Are you someone who has thought about investing in a rehab project? A recent article over on AskaLender.com looks at the process of doing a fix-n-flip and explains the process of buying a fixer-upper, remodeling and/or renovating it and then selling it at a profit. They rightly point out that “it’s important to know what you’re doing when taking on a fix-and-flip project. If you make a mistake, your profitable investment could turn into a costly money pit.” Indeed….always do you due diligence before making any investment.
Doug DeShields, president of the National Real Estate Investors Association, and an active rehabber himself, said he typically looks for homes that were built between 1950 and 1975. “They have good bones, good structure,” he said. “They’re typically brick and we can tend to do well in those houses.” Part of knowing whether a house has “good bones” or not is having some familiarity with what it takes to make necessary repairs, according to DeShields. “You do not have to be the world’s best carpenter,” he said. “You don’t have to swing the hammer one time. But what you need to do is have a good feel for the various aspects. You need to know a little bit about construction, whether you can physically do it or not. You need to know what makes a good property.”
- Shoot for 70 percent of the after-repair value (ARV) minus cost of repairs.
- Look for homes with good bones (i.e., a solid structure).
- Choose newer homes for faster, less thorough flips.
- Get all proper permits for repairs or additions.
- When starting out, get a mentor to teach you the ropes.