Rehabber from Minneapolis, Minnesota
From a previous thread i stated my plan and goal was to make minimum 20k on a property. Mostly everyone had advised me to tough it out and wait. However, upon doing more research and talking with other investors as well as my agent, they say 10-15k would be the norm at this point and time, due to the high buyer demand for foreclosures. Foreign investors and career flippers who sell 5-10 a month take just 5-10k profit making it harder for new investors to compete, as well as other investors putting in high bids.
With that being said, do I get a project going and take the 10-15k due to market conditions right now since there are more potentials in that range, or do I wait a little longer in hopes of more foreclosures to hit the market for a higher return? Is it better to get the experience as a trade-off for higher returns?
My partner is a handyman and can do about anything except knowing if the property is structurally sound, mold present, no major plumbing issues, etc. So what's the best way for us to have peace of mind WITHOUT having a upon inspection contingency?
Investor from Little Rock, Arkansas
Both of your questions have the same answer.....
Know what you are doing!!!!
I would never target anything less than $20k in profit because I have yet to be under budget upon completion. If I would not have, I wouldn't even make the $15k spread because of stuff I over spent on. I have changed my stratagy a little to compensate by adding a 20% contengency to the rehab rather than the widely suggested 10%.
I have done rehabs with and without a pro inspection. But, never without the contingency. I wasn't happy with the answers I got from a pro (for the money) and have sweated it out because of stuff I missed when I was the inspector.
I am just now re-entering the market after a year. But, I know there will probably be many offers before I purchase my next deal because of the very same reasons you mentioned. A deal has to be good for me before I close on it.
Investor from Fort Worth, Texas
I don't think I would wait for more forclosures to hit the market. That strategy is tantamount to waiting for the market to "bottom out". If the rate of foreclosures never increases, you'll never do anything. Just make sure the deal is good (or try to make sure) and go for it. Fear will hold you back far more than the market.
Regarding 20K profit margin, I've only rehabbed one house and kept it as a rental, so I can't add anything to what Don said. But having done a rehab on a rental and a full exterior rehab on my personal house (all with my own two hands except an HVAC system), I would say that it is VERY easy to go over budge and probably impossible to not go over budget on your first couple.
Real Estate Investor from Las Vegas, Nevada
I agree with Don too that you could easily to over budget. 20k is more ideal but I am not too sure about your market. What I have been noticing in Vegas is that investors/flippers are snatching deals in an insane rate compared to last year. I don't know if it's temporary but I think it is best to wait till you find a deal.
Leon Yang, SZNY LLC