Rehab/ investment Properties
Rehab and investment residential properties, whether single family or multi family, can be a great chance to invest in the current housing market and make a profit. Whether you are a seasoned investment property veteran or just beginning, Design 2 Build can lend its knowledge and expertise to make the process stress free and achieve your projected goals.
First, it is a good idea to identify what your goal is for the rehab project. Is this a quick equity grab or are you pursuing a long term cash flow? Once you know your goal, use that to help plan how you will approach the rehab project, from purchasing, repairs and negotiating a sale. Remember that this is a business transaction and not a personal investment, so knowing your client before making a deal will keep you on track.
Before beginning your project, address the following items to optimize your rehab property.
Estimating Rehab Costs: Rehab projects are intended to make a profit so creating a budget to weigh your purchase and repairs costs versus your intended selling price is very critical.
Five Key Areas to Analyze for Repairs
When looking at a potential investment property, you should look at the areas that would require the most attention, have the highest costs and those that require permits.
1. Site: Take a walk through the property, noting the overall condition and quality of the property.
2. Structure: Structural problems are the biggest factor to consider and to discover before purchasing a property, as they can be the most expensive to repair. What is the condition of the foundation (cracks, unlevel, etc.)
3. Roof: Take a close look at the interior (ceilings) and exterior (fascia, soffit) for signs of damage. Is there rotted wood, loose shingles, or issues near the chimney? Inside, look for water stains, holes or discolorations.
4. Plumbing: Check all of the plumbing inside, such as looking under the sinks in the kitchen and bathroom and check the floor for uneven spots.
5. Electrical: When was the electrical last updated? If unsure, contact an electrician for an inspection. Is there a fuse box or breakers?
Know Your Market: Figure out your target audience and tailor your project to them. What will they expect from a home and what is their price range? Incorporate details that fit the intended market.
1. Appliances: If high-end appliances are not necessary for your market, then do not include them in the renovation.
2. Occupant Size: Single family or multi-family home? Depending on the size of the property and intended market, small details such as separate mudroom, jack-and-jill rooms, and multiple full bathrooms can increase the property’s value and marketability.
Property Age: Is this an older property? The charm of restoring older homes to their former glory can quickly fade if multiple issues arise. Try to determine the age of the building and its condition. Knowing the construction time period can help in repairs later on. Besides the above factors to consider, inquire about non-standard inspection issues such as asbestos, lead paint, toxic mold and pest control.
Building Code: Familiarize yourself with building codes and regulations, particularly anything subject to local discretion. A property that is not up to code can be impossible to sell. Also, contact local jurisdiction to determine the site’s zoning, setback, floor-risk zone, etc.
(Refer to Code Enforcement/Violations in the following section for further details.)
Layout: Assess the building’s functional layout. Does it “work” or will you have to alter the layout to make it usable and marketable? The targeted market should be considered when updating the layout.
How to Approach the Renovation
How much work are you willing to put into the project? It is a good idea to decide your level of involvement before committing to a property. There are two options when approaching a rehab project; either do it yourself or hire a professional. By performing the work yourself you will save money normally spent on labor; however, it is an investment of your time and if not done correctly and according to code, could be a waste of time.
Even if you decide to tackle a rehab or investment property on your own, it is advisable to consult a professional, like Design 2 Build, particularly for structural and electrical/plumbing issues.
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