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