Property Rehab: Fixer-Upper and Construction Talk

When I buy a rental property or fix and flip they usually need a lot of work. One of the most important parts of my investing strategy is hiring a great contractor. It costs a lot of money to initially buy a real estate investment and it can cost even more to repair it. If you don’t have a great contractor to fix your homes, then the costs can skyrocket due to long timelines and increased repair costs.

For more detailed information on my rental properties and investment strategies, check out my complete guide to investing in long-term rental properties.

Why do I buy properties that need repairs?

In my earlier investing days in Virginia, I did what so many other real estate investors do. I bought rental real estate properties. We had to repair the properties and get them into rentable condition, negotiate with contractors, deal with cost overruns, materials and so on. Then after the house was rented, we had to worry about broken refrigerators, broken windows, leaky roofs, clogged toilets and on and on. It was rare for us that we could go a week without some sort of problem. The cash flow was too tight to pay property managers, as well.

A good deal of the problems we dealt with were because we were working with renters. Renters do not usually have a strong incentive to take care of the property.

Are you thinking of selling your home? If so, it’s time to consider how to maximize your property’s curb appeal. Just make sure you avoid these seven common mistakes identified by HGTV’s FrontDoor.com experts. This is a great website with some nice information for both Buyer's and Sellers. Andrew T. Vinarski with Primary Residential Mortgage (717) 975-2040 shared it with me.

1. Dead on Arrival: Gardens may not look great out of season, but spruce them up by getting rid of dead leaves and plants. And whatever you do, don’t “plant” artificial flowers, which are the epitome of tackiness.

If you are thinking about renovating your home, you may want to think twice before you start your project. Many projects will not increase the value of your home, and oftentimes they will decrease the marketability of your house.

Kitchen-1

The following are 10 ways that can actually lower the value of your home:

Overbuilding the area. Yes, you can improve your home too much. No matter what you do, your home is only going to be worth so much in the location that it is in. Make sure that you pay very close attention to the values in your neighborhood. Look at the common features of homes in your area. Talk to a trusted real-estate agent or an appraiser, and ask for an appraisal without improvements and another with them. If it doesn't pay off, then it's not worth it.

A house at 605 West Hollywood in San Antonio TX may not look like much. But it has several things going for it:

It is in the neighborhood called Beacon Hill, which is about one mile from downtown and is rapidly appreciating. Many young professionals and young families are moving into this area. Rents and property values are going up quickly.
As with most of the properties ImpactInvestingTexas handles, this house was owner financed to a buyer.
When you put these two factors together, this average looking property turns into quite a cash flowing machine.

Have you ever seen a property transform in your neighborhood by the hands of a real estate rehabber? In my neighborhood a real estate investor purchased a home last year with serious deferred maintenance. In as short as five weeks, he turned the doghouse in my neighborhood into a little gem and it quickly sold for a premium. All of my neighbors were in absolute amazement at the transformation of the house.
We make rehab loans to real estate investors so that they are able to do such projects. I love to see the ‘before’ and ‘after’ photos of these properties. But aren't you curious as to why real estate investors like these can earn premiums on these properties? Here are some important reasons why:

This may be new information to some and to others a reminder.
As it’s winter, it’s hard to keep anything clean for too long. At least in areas that get snow and ice. So cleaning the windows after you’re through with the rehab may seem a bit ludicrous. But trust me it’s a huge selling point. Most buyers won’t necessarily talk about it, point it out some may not even know what it is, but the house seems brighter, cleaner and more friendly when the windows are sparking clean. We want to sell that property fast. We’ve done all this work to bring this property back to life. Make sure that we get the windows cleaned, and let those buyers see all your property has to offer.

Planning a home renovation? Do it for your own enjoyment, because there's no guarantee you'll get all of your expenses back when you sell.

That's one lesson from a 2014 Remodeling Magazine study. The magazine looked at prices on 35 popular home renovation projects — and just how much of that money homeowners can expect to recoup when they sell.

In the study, prices were based on national averages for time and materials supplied by skilled professionals (no DIY jobs here). While some projects moved the needle on home value more than others, most didn't return 100 percent of the renovation cost at resale, according to the report. And the six projects that yielded the least at resale all returned less than 61 cents on the dollar.

I've spent a lot of time and money doing exterior remodeling of my home, plus a sizable remodel of the master bath. However, the rest of my 22-year-old home needs attention inside. The bath upstairs has dry rot and is dated. The kitchen, likewise, is dated. We have fairly new appliances, but the counters and cabinets probably need replacing. Should I fix up my home or try to sell it as is?
Answer: This is one of those questions where the answer depends on variables such as condition of competing inventory, whether it's a hot, cold or neutral real estate market and the likelihood of return on investment.
Selling a Home in As Is Condition

When you put a home up for sale these days, you're facing stiff competition. In most parts of the country, buyers are faced with huge numbers of homes for sale. Before asking strangers to trade hundreds of thousands of their hard-earned dollars for your little palace, make all the little repairs you've always meant to do but never had the time for.

These 10 basic repairs will help prepare your house for a buyer's white-glove inspection:

1. Repair sagging screen doors and other entry red flags.