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mortgage rates and a general slowdown in renovations, as well as an opening up of the supply chain bottleneck that had slowed lumber delivery through 2021. Keeping to a budget on a renovation project is more important than ever. Given the leveling out of home prices, there is less of a buffer to count on; therefore, it will be key to build in contingency plans and dedicate a higher reserve percentage to potential unforeseen costs and shifts in the housing market. (As anyone who has rehabbed a property knows, there are always unexpected twists and turns that can derail a budget.) In the past, a 10% contingency reserve might have been the standard; we suggest allowing for more in 2022. Labor will likely continue to be expensive, because the labor

shortage has hit the trades especially hard. Finding laborers in a time crunch is also challenging. If you are skilled at making home repairs, consider whether you can go the DIY route and save on cost. ON THE FLIPSIDE We are already seeing home prices level out and fall in some cities, while inventory continues to sit at a record low. Homebuyers simply need more habitable properties on the market. Given that values are likely to rise slowly, investing in a fix-and-flip is still profitable, with the profit margin for flips at the end of 2021 averaging 32.3%. For investors that have the ability to buy discounted properties, it’s possible to expand profit margin now if costs can be tightly controlled. Overall, rehabbing a home continues

to be less expensive than buying an updated home. We don’t expect that to change any time soon. To those real estate investors who know just how satisfying it can be to bring new life to a property, we say keep calm, mind your spending, and carry on. •

Susan Naftulin founded RFG with partner Jeffery Goldberg in 2009. In addition to serving as president of RFG, Naftulin serves on the American

Association of Private Lenders’ Ethics Advisory Committee, where she continuously upholds the real estate industry’s values and supports professional conduct in private lending. Prior to becoming president of RFG, Naftulin held several senior management positions in the mortgage industry, including general counsel, managing attorney, chief operating officer, and senior vice president for both privately and publicly held mortgage lenders. Before entering the mortgage industry, Naftulin was a creditors’ rights attorney with the Philadelphia law firm of Fox Rothschild LLP.

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