There are plenty of stories out there of people making a killing buying old dilapidated homes fixing them up and selling for huge profits. Seems simple enough, go out and find a house which is “a good deal” buy it, fix it up, sell it for more than you have into it and keep the profits. Those TV shows on the subject sure make it look easy and you sit there thinking, hey I am as smart, if not smarter than those guys, I could do that. If you follow these shows at all it looks as though you can, as one show puts it, (and I am paraphrasing here) make more money on one deal than most people make all year.
There is undoubtedly a way to make some serious money in rehabbing right now especially with so many REO and Short Sales out there. Just make sure you know what you are getting into before you jump head first. I am not going to point out the obvious here, such as knowledge of construction, sales, financing and the myriad of other talent required to make any rehab work. No what I am talking about here is the unknowns you have to ask yourself if you have the aptitude for.
1. Delegating – If you are a control freak you are in for a very miserable journey. You need to oversee the goings on with your subcontractors during rehab but if you are a micromanager you will hinder the process not help it. Most contractors have “their way” of doing a job and can spot an amateur a mile away. Seek the best system to keep these guys on task and let them do their job without interfering. Make sure you are very clear on scheduling including dates and milestones and exactly what is expected and when. Set clear cut objectives be as detailed as possible and if perhaps the subcontractor falls behind (and they will) set aside a brief meeting to discuss the progress or lack of. If you have done your homework upfront and hired the best you can chances are it will be only be a temporary problem.
2. Sense of Humor – I cannot say enough about this and it seems rather odd to mention here but yes there is a time for and a place for levity on the jobsite. If you are one to take everything too seriously a minor problem can become monumental. Soon you will find that what should be a great experience will quickly become drudgery. Enjoy the ride and chances are you will have a better chance to succeed.
3. Money Manager – If you find yourself unwilling or unable to balance and reconcile your personal checking account you could be in for a rude awakening. My advice is this, have someone you know and trust dearly help you keep track your expenses, or hire an independent bookkeeper to keep you on task, because if you lose track of where your money goes guess what.
If you have never rehabbed a home before just make sure, before going into the project, that there is enough room for profit after all the expenses, and don’t forget buying and selling expenses. Yes the opportunities are there and now is a great time to make a good deal, just understand that like any other “business” there are risks and potential for losses as well as profits.