All Forum Posts by: Richie Martin

Great question, Richie. One way to determine when enough is enough is to start with your end goal: Are you flipping or holding long term? For flips, you want to ensure your rehab budget aligns with your target after repair value and leaves room for profit after all costs. For rentals, determine whether the rehab will increase rent, reduce maintenance, or boost long term value.

A good rule of thumb is if a repair doesn't increase value, rentability, or efficiency, it might not be worth it. It’s easy to over-improve a property beyond what the local market supports, especially if emotions creep in. Always weigh cost vs. return. Have a clear exit strategy to guide your decisions.

How are you planning to use the property?

Determine ahead of time what rehab you plan on doing for every property.  My list is:  Floors, painting, kitchen,...and nothing else.  That means if the property needs more than that, I don't buy it.  The list of "do's" is based primarily on costs I can control, and rehab I will get returns on.  Most everything else, is not controllable, and that means the cost is also not controllable.

Hello Richie,

I hope you're doing great. There is a lot of different perspectives and strategies in deciding how much you plan on putting into a property to renovate and rehab it compared to how much you expect to earn to cover costs for the rehab, closing fees, and gain a profit. It may ultimately depend on how much value and profit you expect to gain from those rehabs. As an example, renovating costs may be $10,000 to increase the property value by $20,000, with $5,000 in closing and other costs, could justify the time and cost if your goal is to make $5,000 profit if that is what you are aiming for. Compared to $40,000 to add $100,000 of value could give you a larger windfall. It may all depend on hard costs and projected profit to see if it is worth it or not. Either way, we definitely recommend doing renovations in some kind of entity structure, such as an LLC or Corporation for asset protection and tax mitigation.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Great question, Richie. One way to determine when enough is enough is to start with your end goal: Are you flipping or holding long term? For flips, you want to ensure your rehab budget aligns with your target after repair value and leaves room for profit after all costs. For rentals, determine whether the rehab will increase rent, reduce maintenance, or boost long term value.

A good rule of thumb is if a repair doesn't increase value, rentability, or efficiency, it might not be worth it. It’s easy to over-improve a property beyond what the local market supports, especially if emotions creep in. Always weigh cost vs. return. Have a clear exit strategy to guide your decisions.

How are you planning to use the property?

SOWs are so job specfic, it's tough to have a 'one-size-fits-all'. PM me and I'll send ya one I used to use....

@Richie Martin I'm not aware of a true "formula", other than how much you think you can increase the value from your rehab. You could assume that what you spend on rehab should translate into 20% higher value at the end. So, on a $50k rehab, you'd expect the value of the property to increase by $60k. But in the end, the "true" ARV is what someone will be it for (or what it'll appraise for if you're doing a refi).

@Richie Martin The ARV is what you think you can sell the property for after the rehab.

@Richie Martin No, that's not correct. The rehab is not part of the ARV.