Rehabbing to sell, good time?

Question

I have been into RE for a while now but haven't gone full force yet, only own rentals at this time. I am planning on finding a decent house that I can add value to, fix up and sell. I can do all the work myself so that will help broaden the possible profit margin.

I know a lot of it is area specific. I am looking at doing business in the Louisville, KY and Indianapolis, IN areas.

Personally I think that it is still a good idea in these areas as long as the numbers work, but I would like to get more opinions from people that are in the business and have experience rehabbing homes with the goal in mind to sell them.

My goal is to do both, rehab and sell and buy more rentals. Selling helps rais the much needed capital for me too. In my current situation I work full time but I have 4 days a week free so I really want to start taking advantage of this time working in RE.

Any advice is much appreciated.

Michael J. · Answer

Bump

Michael J. · Answer

Thanks for the info everyone. Whatever I do I am planning on only buying a property that I can support with my current income so if worse comes to worse I can support the property until sold without using up my savings.

The only thing I would worry about falling back to a rental instead of selling is if I put a lot of money into it for nicer stuff than what you would normally put in a rental, but at least it is an option and may be better than sitting on the house for a year.

I am planning on attending some auctions in the next month or so and see what I can find.

If anyone else has info to add please do so, I would love to hear from as many people as possible.

Thanks,

I live closer to Louisville.

Johnny S. · Answer

I've done 3 in the last Year in New Albany, IN.  Just across the bridge from Louisville, KY.  2 were sold to investors looking for rentals sold in the low 40's.  The other was sold to a family in the mid 60's.  Both rentals were under contract within the first month and the other home took about 2 months to find a buyer.  All three were sold FSBO.  Granted I haven't done this for too long and don't have a ton of exp., but I haven't had a problem getting rid of homes in this price range.  
As said earlier, if you buy right, you should be ok.  Also, I've done most the work on these homes myself.  And, if worse comes to worse and you can't sell, you'll have another rental home.

Lynn Z · Answer

Rehabbing and holding for sale eats away at your profit forcing you to rent it and hold it for future earnings in my opinion.  I know a newbie with good financial backing who bought a large short sale in October.   I remember him saying "I can't afford to carry this thing very long".  He paid $310,000 and just got an offer of $335000.  He sought a bank loan that covered his remodeling plus his mortgage so my guess is he's eaten up his profit holding this house for 6 months.   Not to mention yard costs, utilities, maintenance during the holding period.

I think you need tons of cash to remodel these days or stick to low end products.

Timothy W. · Answer

Forgot to add - another reason I like rehabbing cashflowing property.  If you do it right there's no holding costs.  It's holding profit.  If it doesn't have holding profit then you really shouldn't do the deal.  It will not serve the end buyer.

Jon Holdman · Answer

Buying it right meaning at a price that you can sell it quickly and still make money.  If your market is very slow, as many are, then your place will need to be the best deal around if you want to snag one of the few buyers.   If your market prices are declining, then you will need to consider how long it will take you to rehab the place and what prices will be like then.

Jason Cummins · Answer

This is basically what I was going to say.  As long as you BUY RIGHT. That is the key.  Buying the house is where you will make your money, not selling it.

If you buy right, and can underprice the market and have a better house, you will sell the house.

I have a house right now that I didnt take my own advice on.   It's been on the market for 4 going on 5 months.  I have sold 2 other houses that we started on AFTER this one.

People are still buying houses, just not at the rate they were before.  So if you have a superior product, and a lower price, who do you think they will buy from?

Jason F · Answer

As long as you are buying the houses for far less than what they are worth....it's always a good time.

Timothy W. · Answer

Which are you located closer to?  There's really only one rehab/flip market right now and that's rehabbing rental property to flip to rental property investors which means COST EFFECTIVE rehabbing - not pretty rehabbing.  Pretty much the only consistent game in town right now.  That or rehabbing to lease option/land contract but I'm not holding my breath for folks that can't get financed this year to magically get financed next year.