Flipping Houses

Getting Your Start In Rehab Real Estate

156 Articles Written

I am curenlty sailing the Pacific on a 2 1/2 week cruise (yes, this is a great business).  Rather than skipping my weekly posts, I thought I would share a previous article on getting started in rehab real estate investing.  And you thought re-runs only happened on TV!

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Getting Started In Rehab Real Estate

You want to rehab houses, but where do you start? We see the fix-and-flip “reality” shows that, somehow, manage to have no basis in reality. How hard can it be to buy a house, rehab it, sell it, and retire to a life of luxury on the French Riviera? On TV, it all happens in thirty or sixty minutes. Easy, right?

Choose Your Weapon
 Rehabs fall into three basic categories: personal use, rental, or flip. Each type carries a different level of risk. My recommendation for most people is to start by rehabbing a house for their own personal use. It carries the least amount of risk since you will not have the added carrying cost of a second property. If you live in the house while you are renovating it, you just have your regular living expenses.
There are other advantages to living is a house while rehabbing it. You do not have the same time pressure. When you are rehabbing a property with the intention of flipping it, you are losing a little piece of your profit everyday. Holding costs are a ticking clock, time is money. When you experience a delay, you lose money. If the market makes a quick sale difficult, you lose money. The risks associated with flipping are enormous. The current real estate market conditions just make it worse
Make It Your Own

When you are renovating a house with the intention of flipping, you need to keep the end user in mind. This usually means making conservative choices that will appeal to the widest number of potential buyers. If the house is going to be your residence you have the ability to incorporate your own personal taste. If you want purple walls with a pink ceiling, then go for it. Rehabbing a house for your own use allows you to create a home that fits the way you live.

You still need to keep resale in mind if you have any intention of selling in the near future. Determine what you resale timeframe might be and work with that in mind. If it is going to be a long-term hold you should do whatever makes you happy and fits your lifestyle.

Learn As You Go
No matter how much you study and prepare first time rehabbers will make a lot of mistakes. It’s much easier to learn from those mistakes if you are not under the constant pressure of having to complete a flip. My first rehab was a major learning experience. I had the luxury of time. I was able to take the lessons learned and carry that knowledge forward into future projects. If that first rehab was intended to be a flip I would have lost a lot of money and it probably would have been my last project.

Instead of trying to earn a bazzillion dollars on your first deal, look for one that can propel you to future success. Start small and keep the project within your ability. With each success you can move into bigger and tougher projects. As your ability grows, your profits will increase and your profits will soar.

Happy rehabbing!

 The best way to see the future is to create it.Unknown

    Joshua Dorkin
    Replied over 11 years ago
    Enjoy your vacation, Richard! It sounds like fun. Great post, BTW.
    Joshua Dorkin
    Replied over 11 years ago
    Enjoy your vacation, Richard! It sounds like fun. Great post, BTW.
    Tim Hawkins
    Replied over 11 years ago
    Richard — rehabbing sounds like it might be an interesting way to do different RE investing (we currently have 8 rental properties). I’ve seen lots of fix-and-flip TV shows and blogs extolling the virtues of the flip, but never have I seen actual accounting (full financial disclosure) showing ALL expenses including taxes and number of hours worked. In the end, working folks want to compare results based on time. Time is pretty much all we have on this earth that is perfectly comparible. So, might you share some non-personal flip accounting with us? Enjoy the cruise, where you going? Hawk
    Replied over 11 years ago
    I believe any useful tips someone has to lend flippers is great seeing how this can be a very challenging market. So many things can go “unexpectedly” wrong especially with today’s unsteady market!