Real Estate Rehabbing Myths Exposed

Real Estate Rehabbing Myths Exposed

Real estate, like any other industry, is plagued with numerous myths and the rehab business is perhaps the most myth-ridden of all. From foreclosure to the myths about properties that are ideal for rehab, there is truly a need to look at the reality and not some perception that has developed over time.

The Money Is In Fixing Houses

Many real estate companies or professionals who deal with rehab, foreclosure, or brokering believe that in the rehab business, one makes money by keeping the repairing costs low. The cheaper the fixing costs are, the more money can be made. Some even have the perception that if the fixing costs of a house cannot be kept under a certain budget then there may be no money in it at all.

The reality is that just like any other real estate transaction, how much money you can make is simply based on how much you are paying for the house when you buy it and how much it is or can be truly worth.

Many times people believe that if you purchase a property for one hundred thousand and spend fifty thousand on repairs, you would make fifty thousand by selling it at two hundred grand. Most people never take into account the holding costs which include: taxes, insurance, utilities, interest expense, and permits. The cost of selling the property or closing costs is something that is usually never accounted for either and that can run anywhere from six to nine percent of the sales price.

That is why if you buy a two hundred grand worth home at one hundred fifty thousand that needs thirty thousand of repairs then you are running a huge risk of potentially losing money (you will not make twenty thousand as most people would think). It all boils down to the buying price and the selling price and not on the interim costs. Albeit, one would want to keep fixing costs low but fluctuations in that shouldn’t make one lose sleep.

Baths & Kitchens Are Too Expensive To Repair

Many people in real estate are of the opinion that baths and kitchens are very expensive to repair and many opt out of a rehab deal simply on this context. In reality, baths and kitchens would have anyway been remodeled during the fixing process and it is always better to do it from ground up. Furthermore, when kitchens are trashed and baths have caved in, there is less competition and one can buy the rehab property at a much lesser price.

Rehab Is A Lot Of Legwork

Those who newly venture into rehab real estate or think of it, feel that there is a lot of legwork and one would have to be present at the property all the time. The truth is, once you have regular contractors, suppliers you have dealt with for multiple jobs and your contractors know what you are looking for, there is a lot less legwork. Spending alittle more time on the front end developing a detailed scope of work can cut down time wasted at a job site. Read “Hiring a Contractor” for tips on working with contractors and making sure that your job is their top priority. Just a couple of visits every week for an hour or so should be all that you have to invest.