It’s easy to tell yourself one day that you want to start rehabbing houses in Billings Mt and even easier to find houses that you think are just perfect to start your rehab career on. What’s no easy is making money, selling the house and the fixing the house up. It’s very easy to make mistakes during your first few projects and lose money.
But if you do your homework then finding, fixing and selling those ugly houses will be a lot less of a hassle and more like less stressful on your life. There are a lot of mistakes a rehabber can make, but I want to touch on five of the main ones sure to put a frown on any real estate investor’s face.
- Buying at too high of a price
- Doing everything yourself
- Not getting the right person or contractor for the job
- Lack of money
- Bad exit strategy to sell the house
Buying at too high of a price
Everyone has heard the phrase buy low and sell high. Well the same rule applies in Billings Mt real estate rehabbing. You cannot pay too much for that rehab property or else you will not be able to sell it for enough to earn your profit or break even.
Before signing anything to purchase a potential fixer upper, do your research and due diligence. Check to see how much properties in the surrounding neighborhoods are selling for. Get an inspection of the property so you know what sort of repairs it is going to need. You can do this after you sign a contract and then go back and negotiate a lower price, if you have an inspection clause in your contract. So make sure your contracts are structured right. Ask contractors to figure up estimates for the repairs it’s going to need. Add in carrying costs, such are utility, payments, and then add all the costs you anticipate and add that to your asking price. Is there still room for you to make a profit? You should always have over $10,000. You need a good amount of wiggle room, because unexpected expenses always arise.
If you have no wiggle room then you need to either go back to the seller and negotiate or cancel the contract and walk away. Show the owner what it’s going to take to fix up the property.
Doing everything yourself
Most rehabbers in Billings Montana have the disease that they think they can do work cheaper and more effective than anyone else. Fixer upper houses are often in need of some professional care. Even the world’s greatest carpenter does not know everything about rehabbing. Most carpenters know little about plumbing.
If you do want to do some of the work yourself then do some small things such as painting, stripping, landscaping, cabinets, clean up and random labor work. Have professionals do things such as electrical, plumbing, carpentry, roofing, and other specialty work.
Establish beforehand how much of the work you are going to do and what kinds of contract labor you will need. That way you can figure those costs into your asking price.
Not getting the right person or contractor for the job
There are plenty of hardworking, practical, stable contractors out there. Not all of them are bad; there are some that you need to watch out for. The good contactors are often booked for months with work from several other rehabbers.
It can be tempting to take the first contractor that you find, who can start work immediately. That contractor could be an amazing one. Take time to ask for references, licenses, and insurance. A little research on your contractor can greatly reduce the likelihood of having to fire a contractor for any reason. It also reduces the risk of a contractor doing a sloppy job.
Lack of Money
A lot of first time real estate rehabbers do it to make money. It takes money with rehabs to make money. You will need to make sure you have enough money on hard, in form of credit or in a loan form to complete your Billings rehab project. You never want to get the house half finished and then find out you have no more money.
One way to have enough money is to use a hard money lender. The sometimes will give you rehabs loans for 100% of the rehab costs. I recommend having a high cash reserve saved up just in case something happens.
Bad Exit Strategy to Sell the House
You have to market your fixer upper houses once the rehab is finished and ready for you to start showing to homebuyers. It’s easy to forget who you are fixing up your property for. Your rehab project is not your home and needs to be appealing to your target market and not your own personal taste.
A realtor can help you in staging the home and bringing in the right clients to look at the property. They can also help to start get the word out to potential buyers about an amazing house which is almost finished, before you are done with the rehab.
These five mistakes are fixable. If you have enough sense to switch your mindset and go back to the basics of real estate rehabbing in Billings Montana. Know the mistakes before hand and avoid them on all of your fixer uppers. Now get to flipping those houses Billing
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