Plan Before You Start
Successful Rehabbers and Real Estate Investors have a Step-By-Step plan! Use a check list or better yet, have Systems in place to automate the process.
(Note: A System can be as simple as following a check list and or keeping on tract with a daily planner)
Just Start and Plan As You Go
Sometimes we just have to Do-It!
In this case, if you can afford it, consider your investment property a second home and see how it goes (although this is not recommended).
If the purchase price is low enough and you're confident you could sell the home or rent it out for a profit or positive cash flow, go for it.
Trial and Error is still an effective approach to success. Keep good records, make your check list, and your Step-By-Step plan will evolve as you work through your investment property. (See the outline below)
Marketing should be at the top of your check list. Who are you going to buy great deals from? Who are you going to sell, rent, or lease option to?
Learn more about investor marketing.
Already Started? Make a Binder!
Take a 3-ring binder and a package of dividers and keep tract of your documents and projects. Keep a receipt envelope in the binder, you'll be glad you did come Tax Time.
This binder will become your Rehabber's check list for your next property to help you refine your real estate investor skills.
Make your check list before you start. Then refine your plan as you go.
Choose your Objectives: What do you like to do as a Rehabber most?
Money: How much do you have to start with?
How much will you need to complete the project?
How much do you want to make in terms of cash flow or capitol gains?
Note: "Money Loves Speed and Success Loves Action"
Once you start, stay on schedule and keep within your budget to maximize profits. The rehabber check list outlined below will be helpful to get you started.
Are you a Sole-Proprietor or an Entity like a LLC or Corporation?
If this is your first property, you should be alright with the "second home" scenario.
If you find that you don't like being a real estate investor, sell that one house... and your out.
Continuing with multiple houses should be laid out as a business for many reasons...
- A business is something you can sell
- Credit score protection
- Liability protection
- Funding advantages
- Additional business deductions (tax strategy)
As a business, it becomes more important to set up a system of working your properties! Using the rehabber check list makes the procedure easier without missing a step.
Check out the legal forms available for all States on the link below...
Build Your TEAM as You Need Them
Add the following to your contact list and build your rehabber check list...
- Financial Planner
- CPA and or Accountant
- Money Lender
- Realtor / Broker
- Insurance Agent
- Property Inspectors
- Marketing Agent / Printer
- Property Manager (if needed)
- Maintenance Providers
Notice from the list above these people will not be your employees. They are service providers that you will need on occasion during your real estate investing and rehabbing process.
We need our Team to help us through our Step-By-Step process. Real estate investing and rehabbing is not a one person performance!
Find them as you need them... And Build Relationships!
If you don't know your town - do the research. You should have an idea
of who is going to buy or rent your property before you buy it.
As Ben Franklin said, "Don't reach out into the distance, but recognize it and embrace it, right where you are."
I have worked for companies who made that mistake and went out of business.
I've invested in properties far from home that ate up my profits.
I've known Ben Franklin's saying for more than 30 years, and now I know from my own mistakes, "Invest close to home", (until your business is large enough to support long distance investing).
Put the words "Close To Home" on your rehabber checklist to remind you that the deal of the decade is in your own back yard!
Click on link below to find the demographics for your town...
Finding The Property
If your like me, a Rehabber, I'm looking for a property close to home that I can work on at my convenience.
Choosing Your Objective means, What You Would Like To Do With A Property. This will determine what you are looking for. This is very important.
The more you know about yourself and what you are looking for, the easier it is to find the property that will make you money, faster! (And easier to make your rehabber check list a system that works for you)
The Home Inspection Check List and many other inspection check lists will help you determine the amount of work you can handle and help you prepare your rehabbing budget.
Find a local Realtor® that you like and build a relationship with them.
Be specific on what type of property you want to buy and your Realtor® will give you a list of properties for sale to look at.
Use all the resources available to find properties...
Before you ask your Realtor® for a showing
Do a Drive-By first. Exterior evaluation is most important.
Your Buyers and Renters should do the same when you're offering a home for sale or a place for rent!
If you're not working with a Realtor® and would like to Have a Local Licensed Real Estate Agent Contact You, and they'll find what you're looking for.
This is better than shopping around for an Agent and wasting valuable time.
Click on the link below and have a Professional License Real Estate Agent contact you now. There is no cost or obligation to have a Realtor® contact you. Only that you agree to talk with them.
This service is available in All 50 States, Canada, and Mexico.
If you know what you can sell or rent the property for...
You know what you can pay for it...
Less expenses; rehabbing, and carrying costs.
This is not the place to guess!
Run Test Ads before you buy! Advertise for rent and or for sale ads in the area you want to buy in to see if you get any response.
The offer has to be win/win to get a great deal. Keep in mind...
"You Give Me Price and I'll Give You Terms" or...
"You Give Me Terms and I'll Give You Price"
Avoid falling in love with the property! This is business.
Buy Low - Add Value - Sell High.
The Offer Gets Accepted
Put the terms of the purchase offer that need to be completed on a timely schedule in your rehabber check list. (Your Realtor will help you).There are time frames allowed in the offer to...
- Get the money,
- Do the inspections,
- Get the insurance,
- Get your estimates,
- Clear the Title on the property,
- Do your "Scopes of Work"
- Check with your City Assessor and City Building Inspectors
- And schedule your contractors if you use them.
NOTE: The City Assessor: Know your property tax responsibility of the purchase price before you buy.
It's a phone call or a short visit.
City officials are great people to get to know in your community... they offer their knowledge, referrals, are quick to respond, and are instrumental in helping you follow the building codes for public safety.
It is obvious to get insurance on our property to protect our investment.
It is mandatory to get insurance on the property when we get a loan or mortgage to protect the lender from loss.
Workers Compensation Insurance is all too often overlooked when we hire a helper or a handyman. Talk to your Insurance Agent and get all the facts BEFORE YOU TAKE THE RISKS.
Ask your contractors for proof of liability insurance and for proof of Workers Compensation Insurance before you hire them.
Their Insurance company will send it to you directly and confirm an up to date and paid up policy to cover your construction project.
For tips on saving money on insurance and how important Remodeling Contractors Insurance really is, click the link below.
Use a calendar as part of your rehabber check list to keep tract of the dates outlined in the offer up to the closing.
Then you will have the complete record of the entire process to copy from for the next deal.
The closing is the transfer of property, money, and contracts.
The paper work will be prepared by who ever you choose to represent you or you can do most of the paper work yourself (not recommended).
Most often the Title Company can handle all the paper work with the exception of preparing the offer, however they may provide purchase offer forms you can complete yourself (Attorney review or preparation advised).
After the Closing, the Real Work Begins...
Break Down The Projects and make your Rehabber Check List
Plan all the project from start to finish with a scope of work for each project.
I prefer to start with the exterior for curb appeal while I'm working on the inside.
Interested buyers and renters will be stopping by once the outside is complete.
Get their names and numbers and call them back when the interior is complete!
- Roof, Siding, Windows, Doors
- Landscaping, cement, lighting...
Exterior should be done first to pre-sell on curb appeal.
Advertise while working on the inside, Encourage prospects to drive by once the exterior is completed.
Don't let the prospects inside until the interior work is completed. Impressions of a home under construction is not a selling advantage!
Scope of Work for each room...
Scope of work for each trade...
- HVAC, Electrical, Plumbing, Carpentry...
- Scope of work you as the owner will do... where ever your talent lies. The easiest are landscaping, painting, clean up, demo, etc.
All at once or one room at a time?
The advantages of all at once is when you have a construction crew budgeted to do all the remodeling.
If you are the do-it-yourself rehabber like me, I demo one room at a time, and sometimes two rooms at a time if they're related with project tasks like electrical, plumbing, tile, cabinets, etc.
Everything on a schedule... Use a check list and a calendar.
The importance of having a plan is, No Plan - No Schedule!
Deadlines for contractors are a must. Pre-sold and pre-rented properties must be completed on time to maximize your cash flow.
Cash flow and profits may be your motivation...
No plan and missing deadlines eat away at the profits for every day that is lost.
Accounting and Tax Planning
An important key to success is TAX PLANNING! Many of the success formulas for the investor are tax advantages and keeping the profits we earn.
find an accountant and CPA. Interview them to find out their fees and how well they understand real estate investing. Make sure it's one of their specialties!
Learn to Keep Excellent Records.
Keep tract of all receipts. Or hire an accountant to do all the record keeping for you. This is a major overlooked step where investors loose the most money.
Keep Excellent Records
My Rehabber check list is usually the last property I worked on.
Refer to Real Estate Bookkeeping.
I keep my records in a binder and one binder per property.
My contact list is up to date and I have a record of the last project I hired that contact for.
I simply start a new book for the next property and thus my system is ready to go.
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