Rehabbing Costs: When is Too Much, Enough?

The recurring issue for all of us rehabbers is trying to find the right balance of how much work and materials you put into a rehab, versus how much you can sell the property for once its done. On the one hand, a completeley redone house, right down to the smallest detail, will sell better and quicker, but can eat through any potential profit margin on your project. But if you don't recondition the property enough, it can sit unsold for much longer periods because there are plenty of other properties available to buyers that have had more and nicer finishes. Why would a buyer pay the same for your rehabbed house when they can get one down the street which has been refinished to an even higher condition?
So the key is being able to strike the right (best?) balance between cost of rehabbing and your potential profit from the project. Some of the rehabbers we know like to go all out and make the property the 'shining star' on the block. I like that idea too, and would do it like that every time if there were enough margin in the deal to make that work. Sometimes, however, to make a property newer than new, the repair and upgrade costs could far exceed the potential sales price of the property. The other end of the spectrum is the mindset of going in and doing minimal work on the property. Painting inside and washing the windows might work if the property is already in fantastic shape. In reality, there are very few of these kinds of properties around. Almost any house you buy as a rehabber will need some work (except of course if you plan to wholesale the property, but that's a subject for another time).I like to aim for somewhere closer to the complete re-do end of the spectrum. This includes not only an eye-popping kitchen, but paint, windows, flooring and even some nice landscaping. As your Realtor will always tell you, curb appeal is vitally important. After all, how can the buyer purchase your property if they won't even get out of the car to go inside and have a look? This also gets back to the basic skill that every rehabber should have: "Know Your Market"! We have all heard that knowledge is power. But in this case it is even more important that that. Knowledge is the tool which will help guide you to correct decisions about your rehab property, and will help you to avoid the tragic outcome of a house that won't sell quickly, or sells for much less than you need it to. ~ Posted by JT

Investors and Short Sales

We find that most sellers of short sale homes didn't start out with the realization that they could, in fact, relieve their stress and anxiety so quickly. In our investing business, and in today's real estate climate, we have by necessity become short sale experts.
Our investing includes a number of purchases which have come to us through short sale purchases. Yes, they take a certain amount of time to acquire, but in the long run, we get an opportunity, and the sellers of the home are relieved of their burden. Here's how it works:A home owner who is underwater finds out about us, and contacts us. We take a look at the home, and, often, it suits our needs as investors. Either way, we put the homeowner in contact with our amazing and talented short sale team, Short Sale Angels. What they do is list the property and help us write an offer on the home. Since banks require that a property be listed in order to approve a short sale, this facilitates the short sale, and the homeowers are not left stranded and waiting for the bank to come and kick them out of their home.Sometimes, instead of the home owner contacting us, we find a property through usual channels such as the local MLS, or because a Realtor contacts us with one he or she feels would work for us.What we really like about the process is that we can do much the initial counseling and support for the home owner who is in need, and direct them to a variety of services provided either by our team or by our associates. One of the most important things to accomplish as a successful investor is to be prepared to be of service to the home owners you want to work with. We believe in solving THEIR PROBLEMS FIRST. If you can do that, you will always be somebody who has earned and kept their trust.~ Posted by GRR/GSH

Private Money

Don't be afraid of private money, or even hard money, if you are going to invest. You need to leverage your efforts, and in today's market, with so little opportunity to earn good returns on cash, many investors are looking for a SAFE way to do better on their nest egg. Note, I said "safe." If you are doing it right, you'll be interesting to private money investors simply because you understand their position and how to minimize their exposure. You'll want to be able to show them how you will protect their investment, and what their options would be if the plans didn't go as planned. If you are taking loan against a property you'll be rehabbing and reselling, you should not even meet with a private money lender until you've done your homework and have firm numbers on: purchase price, repair costs, and after market value. You'll need to make your presentation clear and easy to follow. And the terms a smart money source will be looking for will be a loan secured by a note and deed of trust which is recorded in the county where the property is located. We routinely fund our transactions with private money loans because we understand that taking care of our money people is good business. We pay a great interest rate and borrow with short term loans. We are in, and out, generally within four months. And, we keep our project calendar as full as we can manage so that when a private money lender approaches us, we can usually place their money quickly so that it starts making money for the money person and for us, right away.
~ Posted by NH

The "F-Word"

We've all heard it. Some of us have uttered it in flagrant moments. And regardless how we've invoked this word (or not), every one of us recognizes that there is a dirty, sleazy, undertone to it.

Not only are we using the word, but many of us are doing "it", too. It may be dirty. It could be inappropriate for discussion in polite company. It feels a bit like we're doing something sneaky, but at the same time, when we do it right, it feels SOOOO good!

That's right. I'm talking about "Flipping." So, why, then, are many of us dancing around the truth? Every successful real estate investor these days is flipping.

Here are my thoughts. Ten years ago, when the real estate market was so hot you had to wear oven mitts to be an investor, flipping became the new day-trading. Seriously. And, many"investors," frankly, never pput a dime into the properties they flipped because they only held them long enough to re-list them and close escrow. Really?

No wonder flipping became a bad word. Each iteration of 'flip' distanced the new owner from having any knowledge of the property, and thus lessened the likelihood that hidden issues would be disclosed to unsuspecting buyers.

While all of this sort of activity came to a crashing halt as this 'new economy' (as I like to refer to it) imposed limitations on flipping opportunities, still, the stigma of the concept of flipping properties remains.

In today's market, flipping, as it once was done, is simply not an option. Jeff and I like to refer to it as "Rehabbing" and to ourselves as "Residential Rehabilitation Experts." Truly, we are just that.

Think of it: we take an abandoned REO property in a neighborhood that is slowly reviving itself, and we go in and start at the sidewalk and work inwards until the entire property looks like a Martha Stewart magazine shot. We are not flipping. We have breathed new life into a home on a city block, where it was most needed.
~ Posted by NH

We are a bit slow getting this blog off the ground, but I wanted to let our followers know that our mission with this blog is to share and be transparent about the benefits, rewards, and even the headaches of being a real estate investor.

Here's one big "Super Secret Squirrel" tip: Be honest about your intentions. Always. In this biz, it's a small world. If you are great, and you make sure everybody wins, you will find that your past clients and customers will bring you more business. If you ever, ever, fail to keep your word or mis-lead a person who is doing business with you, you will most likely learn a hard lesson. We have seen this over and over with people who WE have considered partnering up with. And, note, by the way, that I said "considered."

We look forward to networking and sharing with all of our readers, and we welcome input, questions, etc.

We will HAPPILY respond to questions submitted to us either via this blog or by email.

Feel free to contact us any time: Investors@GSHomes.biz
~ Posted by JT