INVESTMENT STRATEGY
REHABS
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The 7 Keys to a Successful Rehab INCLUDING THESE SOMETIMES-OVERLOOKED STEPS TO YOUR REHAB PROCESS CAN HELP LEAD TO A SUCCESSFUL OUTCOME.
• Other holding costs. You’ll need power, heat, air conditioning, etc. Don’t forget to count that in your budget during the time you will be responsible for those costs. • Staging. If you’re going to rent the house or flip it quickly, you must ready it for people to see. Don’t forget to include the cost of staging the property. • Permits and other regulations. Know what the city is going to charge you in permits and other fees to take the property from where it is to where you want it to be, and then put all those costs in your budget. Give yourself a buffer, especially in today’s market. A buffer of about 15% of your rehab budget can help with any unforeseen issues. No one will be upset if you don’t use the buf- fer, but it will be painful if you don’t have a buffer and run into issues. Figure out what you’re comfortable with and add in that buffer to every project. You won’t regret it. Just as your budget is important, timelines are critical to the rehab process. Make sure you know which parts of your project rely on other parts. There is an abundance of great software for managing time- lines for rehab projects. At the very least, put a timeline in the calendar NO. 3 Build a Buffer NO. 4 Create aTimeline app on your phone to help keep everything moving. Creating and managing to a timeline will help you stay on time with your project, and it will also ensure your holding costs stay within the boundaries you determined as you were budgeting.
by Rob Fuller
lippers and would-be landlords want a magic tool that will
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NO. 2 Budget Having a solid budgeting tool can help you assess your costs. Many tools on the market are wired into updated pricing from major retailers, but it’s always important to buffer. When you do your math, be generous. Make sure to always put real numbers behind everything that needs to be completed. Another important part of budget- ing is to account for all your costs. Make sure you include: • Materials. Consider everything you must buy and the cost of getting it to your property. • Labor. This is the full cost of the team necessary to complete the project. Make sure to account for everyone and, importantly, to pay them in a timely manner when they execute. • Your purchase price. Whether it’s your money, a lender’s money, or a combination, the amount you spent to purchase the property must be included as you develop your budget. • Cost of money. If you’re borrowing money, be sure to calculate what that money will cost within a realistic time frame.
estimate renovation costs and tell them exactly what to fix every time they find an opportunity. Unfortu - nately, such a tool doesn’t exist (yet). But there are steps you can include in your overall process to help you approach your projects more confidently. Here are the seven keys to that discipline. NO. 1 Be Realistic Don’t get into a rehab project without getting eyes on it. They don’t have to be your eyes, but they should be experienced eyes you trust. Some deals seem great or too good to be true. As the old axiom goes, if it sounds too good to be true, it proba- bly is. Once you’ve seen the project, you’re not home free, but you’re in a much better position to know what you’re getting in to. If you have a real estate mentor or someone who has advised you in the past, enlisting their second set of eyes is also valuable. It’s easy to get emo - tionally invested in a deal. A trusted advisor, who will be honest with you, can add a splash of reality to the emo- tion. Pay attention to what others say, but also trust your gut. Head into every rehab project with your eyes open.
58 | think realty magazine :: may – june 2022
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