One of the reasons I wanted to make sure had a blog and kept up with it is to offer those “insider tips” you will not likely find in your typical real estate investment course.
After years of trial and error, we’ve learned it isn’t always most profitable to do things by the book. For that reason, I want to share with you some shortcuts I have found effective for saving us time and money when outsourcing improvements for our flips.
For starters, let’s say that we have a 1500 square-foot home with three bedrooms and two baths. We’ll be using this property as we discuss the possible expenses involved in rehabbing for profit.
Of course, you will be using the 7-step process for outsourcing improvements we’ve covered in this previous post, but here’s some insider info on how we analyze and make profitable business decisions when it comes to these projects.
6 Shortcuts to Save Time and Money During Renovations
1. In the beginning, you will want to eyeball the property and determine how much you think it will cost you to rehab the home.
Don’t worry about not being 100% certain about the total – all you need is an educated estimation.
2. For our 1,500 square-foot, 3 bed, 2 bath home, you would buy the house at $150K, go with a $50K rehab budget, which comes to a need for $200K funding from your investor.
3. Strive to resell the property at $250 to $300K.
This step is where it is important to know how this property compares to comparable properties in the area, so you can determine the After Repaired Value (ARV) of the home.
4. In metropolitan areas, there’s no need to specifically get the dollar price.
The important thing is the reselling of the house. Consider the schools within the area; you should be seeking homes in school districts that are rated average to high.
5. When you work with your agent or title company, pick out areas where you initially think you want to purchase, and then give those zip codes to those people who have access to the MLS and ask them the number of days on market.
How long does it take to sell a house? What’s the average in the area? Days on Market (DOM) is a big part on the process of picking area. If most of the homes on the market have above average DOM, you may want to look at a different area. If DOM is low, this is a good sign to move forward with purchase.
6. Look for properties that are in ownership communities, with at least 80% owner-occupied.
When you have the project management, outsourcing plan, and budget in place, you can then utilize these shortcuts, tips and tricks to make the most of your property. Being prepared and having plans in place makes the entire process less stressful and more profitable for you, and also helps you to develop a streamlined system you can repeat again and again.
If you’re relatively new to investing in real estate or flipping properties, stick with properties that need less than $40-50k worth of renovations. Anything over $40-50k has a lot of room for mistakes. Stick with small cosmetic renovations if you’re just getting started.
Learn my 7 Step System
The renovation piece of the puzzle is a fun one for investors. This is the opportunity to FORCE the appreciation and increase the value of the property FAST. It also increases your equity and profits FAST.