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The “Affordable Custom Home” Real Estate Rehabber/Investor Niche?

Ryan Hartman
3 min read
The “Affordable Custom Home” Real Estate Rehabber/Investor Niche?

When I was active as a Realtor working primarily with investors in Philadelphia, most of my business revolved around finding “Propertunities” for investors to rehab and hold or sell for a modest profit, usually in the that 100-200k range where there were always plenty of buyers. Of course, one of the most stressful stages of the process was the weeks and sometimes months between completion of renovation and settlement day when the investor could replenish the tied up cash or pay off the hard money loan.

What follows below is a game plan for how an investor might eliminate or reduce the costs associated with that uncertain marketing phase. It all starts with implementing fundamental web marketing techniques to build a list of prospective buyers willing to buy your next renovation before you even acquire it…

The “Affordable Custom Home” Real Estate Investor Niche

Basically, instead of acquiring, rehabbing, and suffering through the resale of a property, you might establish yourself as the guy who finds the buyer first, then finds the target property and rehabs/”builds” it to that buyer’s specs.

Here’s how it might go down:

  • You could start by driving traffic to a simple site/blog that revolves around displaying your past projects via pictures and videos. Over in the sidebar of each page you’d have your “Learn More About My Affordable Custom Homes” program lead capture box. A fairly fundamental web marketing approach is being taken here – You offer something unique, the “Affordable Custom Home,” then site visitors feed you a name/email in return for a PDF that describes your program.
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  • As folks are added to your list, you systematically follow up (via email, social media, phone, direct mail) to see if you can’t get the prospect pre-approved for financing.
  • Many of the folks who end up on your list will need help getting credit/cash ready to buy their home. You can either help them directly or refer them to credit specialists to be incubated for the future, but, a good number of the folks will be able to get a mortgage right away.
  • With the Buyers that are ready, start a dialogue about potential locations, search criteria, etc. You might even want to bring solid buyers along to look at target properties with you.
  • Once you’ve identified a property, you can start to draft a broad purchase contract that lays out scope of repairs and sets limits for the finishes that will be chosen. Example – Your purchase contract might specify that the buyer can choose any type of flooring that retails for under $4/sq. foot… or any fridge for under $900.
  • At this point, there’s still a lot that can go wrong, but once you’re confident that you’ve got a good buyer in hand, that the purchase price is set, and that the renovation costs are as nailed down as possible, then go ahead and execute the contract and start working with your Buyer partner on the project. Sync your closing date with your estimated rehab completion date and cut out a lot of that resale stress.

Wishful Thinking or, Nicheful Thinking?

Probably a little of both, I know. I’m sure there are a lot of reasons why this strategy wouldn’t appeal to many, but for the investor looking to reduce risk and establish a large source of buyers for their prospective projects, I’m thinking the “Affordable Custom Home” might not be a bad way to go.

I’ll leave it to you to point out the downsides of this approach in the comments, but I’d like to close by recapping the potential benefits of an “Affordable Custom Home” System

  1. You should easily be able to get a few hundred prospective buyers following the progress of your projects via the E-Newsletter that is regularly sent out from your blog.
  2. Every time you have a new deal you’re considering, you can take it to your list first, checking to guage interest in the location, target disposal price, etc.
  3. You’ll always have a pre-approved buyer for your projects, even before they’re completed, and even with the inevitable disputes/contract defaults that will arise, you’ll be able to cut out a large portion of your carrying costs (most notably the Realtor’s commission) much of the time.
  4. You’ll waste less time at Home Depot agonizing over which cheap bathroom tile to go with.
  5. You might have an easier time getting funded for more deals. I imagine the hard money guys out there would be excited to see your buyer’s pre-approval letter as well as the scope of work/repair plan you’ve put together with the new buyer?
  6. You’ll do more deals, because you’ll be spending less time waiting to close on the ones you’re working on now!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.