Rehabbing Houses: Some Tips To Unleashing Huge Profits
Rehabbing houses is one of the greatest inventions in the real estate world. Whoever thought of this in the first place must have been an absolute genius.
Rehabbing is simply buying a house that needs some repair 'a fixer upper', doing the work on it and then selling it at current market value for a profit. Sounds simple enough right? Well in some respects it is, but only if you get it right can you see the true potential for making the profits this process provides.
Like everything else there are some rules that govern rehabbing houses that can help even the first time property investor to make some money in a short space of time.
Tip 1: Financing
So you've decided you want to invest in property to give you some extra cash and in some cases a shot at a new career rehabbing houses. That's fine. Having finances in place not only for the purchase of the property when you find it, but also for doing the work needed to bring it up to scratch is key.
Explore all the options available to you for raising the money you need.
Remortgaging your home, getting a business partner, doing a joint project with family or friends are all options people have used with varying degrees of success. Whatever you do, make sure all agreements are in writing, this includes who is financing what, how much money is being invested, how much needs to be paid back or what percentage of the sale do they get in return for investing the money etc.
This is good practice as it helps to know what's up front but is also a backup should there be any problems in the future.
Find yourself a good mortgage broker. One who understands what you are doing (rehabbing houses) and can give you good advice on the best deals around that would give you the finances you need. Having this additional advice can help you make an informed decision about the option of financing you choose in the end.
Make sure you have your agreements from the bank or lender in writing before you start any purchase. This can put you in a stronger position than other buyers as you already know exactly how much you can afford to spend.
Tip 2: Buying in the right area
So you've got your financing sorted. All you need to do now is find that house. My advice is to do your homework. Know where qualified buyers want to live. What are the links for commuters? Is it a family friendly area with good schools or young and trendy with lots of restaurants and bars nearby?
What are the developments earmarked for that area? What kind of reputation does the area have and is it getting better or worse? Knowing the type of buyer you want to attract when looking at rehabbing houses helps you pick the right area.
Tip 3: Buying at the right price
Okay you've identified your area and it's perfect for the type of buyer you want to attract. There are lots of properties to choose from so again you must do your due diligence. Knowing how much work you are willing to do on the property, when you're rehabbing houses, comes in handy at this stage. There's no point looking at somewhere that means your money is going to be tied up for months on end when you can't really afford that or you want a quick turn around on your investment.
Working out all your costs and how much you may have to spend on the work for each house you see as well as potential sale price and costs attached will give you a rough idea of the profit you expect to make from rehabbing houses.
Once you've identified a profit margin you are happy with you can go ahead and purchase your real estate investment property that you want to rehab.
Do your sums! Do your sums! Do your sums!
If you've got these first three steps right you are well on your way to making a potentially good profit rehabbing houses.
Rehabbing houses is a great way to make huge profits. And there is another way to find these great money producing properties, usually at a much cheaper rate, for more on this, you need to check out http://www.investinthestates.com.