To Rehab or Not to Rehab
As you probably know, real estate investment opportunities come in all shapes and sizes. You can find investment properties that are already reasonably close to providing reliable, predictable income and you can find investment properties that have potential written all over them. Of course, rehabbing falls into the latter category. But, is rehabbing the right approach for you?
Ask these questions when determining if you want your real estate investment to be a rehab effort:
Do you have the capital?
It sounds like a silly question, but it’s a necessary question. Hopefully, if you are pursuing real estate investments, you already have a strong understanding of your financial standing. Rehabbing is another level of investment in that you will be spending A LOT of time and money on improving the property. You have to consider that added cash drain and also what will be happening with the property during the rehab work. It’s likely that you won’t be gleaning rental income during this time. Many investors will actually live at the property during rehab, to offset that expense, but that leads to the next question:
Are you up for it?
There is no getting around it, if you are going to be a rehabber, you must love it on some level. It is a lot of hard work and can sometimes require compromises on your part and possibly the part of your family.
- Why do you want to rehab a house?
- What is your end goal? Will you rehab it to rent it out? Will you rehab it to flip it? Does the idea fulfill your creative side or your desire to work with your hands?
- Are you prepared to make mistakes? If you are just starting out, that’s likely—one of the key challenges is making sure your efforts meet code.
What is your strategy?
It goes without saying that you should have a strategy in place, before jumping headlong into a rehab project. Make sure it includes:
- Timeline (with flexibility built in).
- List of contractors: you may plan to use contractors for all of the work, or you may plan to do most of it yourself, but regardless, you will need to know who you can call on for help.
- Comprehensive work outline: what needs to be done, which project takes priority and the required order (e.g. you can’t close in the new wall without finishing the wiring), resources required (material, financial, personnel), etc.
These are simply a few questions to start you off. Talk to your real estate investment network—including property managers and mentors who have experience dealing with rehabbed properties. We’ll continue next week with ways to ensure a successful rehab.
