It’s always easier when facing a big problem to divide it into many minor issues. One area where this is especially true in real estate rehabbing – and often overwhelming and confusing venture that may have more moving parts than your car engine! However, understanding how house flipping works (with what happens from beginning to end) will not only make you a more thoughtful real estate investor but also improve your investment eye for rehab opportunities.
At Voyager Pacific Capital, we decided to provide our readers with a quick Seven-Step guide to a successful real estate rehab deal to help fix and flip your investor game and turn your investing journey into a life goal-achieving prosperity.
What is real estate rehabbing?
There are lots of ways to make money in the real estate industry, but rehabbing is one of the most popular. It’s a project that takes anywhere from weeks to months and can provide wide profit margins while helping you expand your portfolio and investing network. But don’t take our word for it; take a look at our 7 step guide below!
Gentrification as a trend
As the world becomes more urbanized, people are constantly on the move. Gentrification has now traveled to rural areas and suburbs as well; it is no longer bound by historic architecture or aesthetics but continues to develop with new advances in cities all around the globe.
The National Community Reinvestment Coalition claims that San Francisco and Oakland are the most “intensely gentrified” cities in America. They analyzed data from the U.S. Census Bureau, specifically looking at American Community Survey Data between 2013-2017
The top five most gentrified cities for 2020 were:
- San Francisco-Oakland, California
- Denver, Colorado
- Boston, Massachusetts
- Miami-Fort Lauderdale, Florida
- New Orleans, Louisiana
7 steps for Neighborhood rehabbing
Building your Plan
With a quick assessment of the property, you can ensure that all aspects of the construction process are on course. Starting your rehabbing project entails more than looking at renovations needed and hiring a contractor; first, assess to make sure there is no problem-child hiding in plain sight!
When creating a plan for renovating an old house or building, it’s essential not just to look at what needs fixing but also to decide if anything should be done differently from before. One must determine things like:
There are many ways to assess the quality of a property during an on-site visit, and we recommend carrying a camera with you, along with some graph paper and measuring tools. Using these will give you the opportunity for detailed assessments of problems and repairs needed as well as before-and-after shots that can be used during negotiations. Make sure to bring along a flashlight, too; there may be some dark corners or rooms where light is necessary for viewing any problems that might exist there.
The improvements you need to make a sell
Always keep in that all the improvements you make should add up value to the property. Does the room feel too dark? Maybe installing bigger windows or a skylight. How’s the floor? What would be more convenient for carpets or flooring? All of these things need to be considered.
Once you have a clear idea of what you want to do with the place, create a sketch of the property, pinning where a repair or improvement needs to be made, try making this as accurate as possible or have an architect or the contractor draw it for you. This will give you a transparent framework of what needs to be made, being able to cross off what’s already been done.
One particular tip from Voyager Pacific Capital Investors is to have a lockbox with a spare key of the property. This will save time whenever the contractor needs to go to the property, and you can’t meet him.
2. Location, Location, Location
Some things never change, and in the real estate market, your location will always be a significant variable for your property price. When selling this type of property, one needs to draw prospective buyers who normally would not consider the area. Try to always appeal to properties near vibrant nightlife scenes, close to the downtown business centers or river walks, good schools or hospitals, all the kind of places that can add up value to a property.
3. Design a proper scope of work
Pre-rehab planning will be a cornerstone for your scope of work. You’ll need to detail in extent for your contractor to see every minor or significant renovation, from gutting kitchens and bathrooms right down to laying a new floor in an attic bedroom. To successfully do this, you need:
- Make planning notes listing all renovations the property needs (e.g., skylight installations, removals, demolitions, flooring, etc.
- In order to make your budget more efficient, have items in different categories such as Need, Want, Optional.
- Have an estimate of the cost of each project, this way; you can balance when spending too much on optional renovations.
- In your notes, detail every single thing that needs to be done. You can have all of the information on everything that needs to be repaired, renovated, or fix. Try to take note of everything down to the last fixture.
- By the time you have everything written down, you’ll have a spending forecast for the project; remember to always leave some space for unexpected issues.
That work should save you a lot of time while dealing with the contractor. That way, workers can start pretty much right away.
Always remember to compare, keep an eye open for the price of houses around the Neighborhood; if your home after renovations costs more than other houses in the zone, buyers will flee.
4. Become part of the community
Positive community engagement is a crucial factor when considering an investment in an area. Look for neighborhoods that already have active communities, which are often shown by neighborhood watches or regular meetings. Attending one of these meetings can be very educational and will give you some great insight into what the future may hold as well as common concerns people face today
Recognize that your planned improvements may be met with skepticism by some long-time residents of the Neighborhood. Meet a few people in the area to start casual conversations about their thoughts on how things are going now and what you can do better.
5. Be Patient
The first few homes you fix up might not be your best work, but they will provide a foundation for success in the future. The more time and money that is invested into these initial projects, the better it becomes to have one or two impressive rehabs under your belt before undertaking anything more significant.
Buying in a neighborhood with many opportunities to purchase distressed properties will only increase the overall appeal and value.
6. Consistency Matters More than Attractiveness
Keeping your rehab improvements in line with the others on the block will help you maintain a high-quality appearance without blowing your budget. Quality materials that are both durable and visually pleasing should be used, but not to excess so as to be out of place or difficult for new owners when they take over.
Some things it’s important not to forget during rehabilitation include making sure everything is up-to date with quality materials while sticking within limits by avoiding an overload of these same features which can raise costs unnecessarily; just use enough top notch material where needed, such as appliances and countertops!
7. Work with an Experienced Financial Provider
At the end of the day, it’s about finding a company that understands your needs and can meet them. It doesn’t take much to be an expert in this industry; just find someone who knows what they’re doing!
There are plenty out there with experience funding all types of properties and communities across the country – so don’t settle for less than you deserve when looking for financing providers.
The Voyager Pacific Capital team is committed to helping you take your fix and flip business to the next level. We are interested in all types of properties, including those that may be located in rough neighborhoods. Click here for more information about our services at no cost or obligation.