For some people, there’s no better way to make a living than making big investments that pay off. That’s why home-flippers are becoming so popular in our culture. Not only is it a way to make good money, but you also get to express your creative side and work with your hands.
However, before you dump your money into a rehab property, there are a few things you need to know. Fixer-upper TV shows are popular and entertaining, but they rarely touch on the downsides of flipping houses. They may make comments or complaints, but they don’t get into the nitty-gritty details.
We want to make sure you go into your rehab property with your eyes wide open. Keep reading for the top four things no one tells you about investing in these types of properties.
1. Getting Financed Isn’t Always Easy
When you find the perfect rehab property for sale, it’s easy to get excited about the prospect of flipping the home for more money. However, getting approved for loans for rehab properties is not be as easy as you think, especially if you’re working independently.
You need to have a favorable credit score. Furthermore, the bank needs to see that you can afford the mortgage payments if you can’t sell the home as quickly as you’d like. Finally, most of these loans include the overtures needed to make renovations and repairs, making them more difficult to acquire.
Look here for more information and options on rehab loans for investors.
2. You Never Know What You’re Getting Into
There are a lot of risks you assume when investing in a rehab property. Even with a thorough and professional home inspection, you never quite know what you’re getting into.
For example, if you start tearing down walls to open up the living room and kitchen area, you may find termite damage, rotting structural supports, etc. You could find other, equally concerning things like pests, harmful mold, water damage, and more.
Take your time finding the right rehab property to invest in. Go with the home inspector and make sure they look at all the potential hazards. You may not be able to break into the walls, but there are other signs of the major issues listed above.
3. Rehab Properties Are Not Simple Fixer-Uppers
Next, you need to understand the difference between a fixer-upper and a rehab property. Fixer-uppers are homes that have seen better days but don’t really have any major damages.
The renovations necessary will be mostly cosmetic. They may also be major optional projects like remodeling the kitchen and bathrooms.
So what is a rehab property?
A rehab property is a home or building that needs a total makeover and large repairs. This includes things like new flooring, new roofing, structural work, new electrical, new plumbing, etc. However, because they require so much work, rehab properties are often incredibly cheap and can have the biggest pay-offs.
4. There Isn’t Always a Big Payoff
Finally, if you’re planning on buying rehab property, you must understand that a grand pay-off isn’t guaranteed. You may end up sinking way more money into the home than you originally thought. This will reduce your overall revenue.
Second, once finished, the house may not get appraised for as much as you projected. Once again, this means less revenue.
Finally, depending on the home, its locations, the work you’ve done, and the price tag, you may have a hard time selling it. Even if the bank appraises the home for what you expected and you didn’t go over budget, there’s no guarantee the home will sell.
Looking to Invest in a Rehab Property
If you want to invest in a rehab property, we think it’s a great idea. Not only is flipping a house a fun and rewarding adventure, but it can also be exceedingly lucrative. Just keep the points listed above in mind.
And if you’re looking for more home ownership advice, check out some of our other property management articles while you’re here. Our blog is full of great information on real estate and home improvements.