Rehab and Resell 101: How to Fix and Flip Competitively
Rehabbing: What You Need to Know
It’s not only the property type and location that will bring in the big bucks at the end. A successful rehab can greatly increase your overall profit. In contrast, a poorly-executed rehab can doom your deal to a lifetime sentence on the MLS.
Did you know that a hard money lender provides funding based on the specific rehab repairs you want to make?
It’s true! If your rehab plans are too expensive or too complicated, your hard money lender can choose to lower the amount they fund. They can even deny funding for your deal altogether! They do this for a couple of reasons:
- Hard money loans are designed to be short-term. Most hard money loan terms are 3-6 months in which you need to rehab and resell the property. If a rehab includes a project that is too complicated, it will take too long to complete and will therefore be denied.
- If your rehab includes high-end upgrades which stretch your budget to over $50k, your property runs the risk of an over-rehab. This means you over-upgrade with the hopes of raising the selling price, but that price exceeds the neighborhood comps. When your house is the most expensive in the neighborhood, it runs the risk of sitting on the MLS for years. That’s time you can’t afford with a hard money loan.
Did you know that some upgrades may not allow you to upsell?
Many first-time flippers believe the more you upgrade a house, the more profit you’ll make in the long run. This is not necessarily true. Putting in granite counter tops, cherry cabinetry and new marble tile may not grant you the lucrative increase you desire. The truth is, in the current marketplace, there isn’t a large price adjustment for these upgraded features like there used to be.
Putting upgrades in featured rooms, such as the kitchen, can contribute by helping you sell the property faster. Though you won’t be able to increase your home’s price with these upgrades, you will make your money back through a quick resale. As a result, you’ll make more money through reducing your holding costs on the property.
Reselling: What You Need to Know
The key factors to selling your property quickly include the following:
- Pricing It Right
- Expert Negotiation
Did you know that pricing your property too high will outright kill your deal?
We’ve seen first-time flippers make this mistake over and over, in spite of our repeated warnings. It doesn’t matter if you’ve decked out your house to resemble the Taj Mahal. No buyer will want to purchase the most expensive house in the neighborhood. Most home buyers enjoy purchasing with the reassurance that they’re getting the most bang for their buck. For this reason, you need to research the surrounding homes, see how much they recently sold for and how long they stayed on the real estate market. Then, price your property competitively. Like we mentioned earlier, adding high-end upgrades to your home does not give you a solid reason to up the asking price.
It does help you tremendously when it comes to negotiation. When a property stands out by having more upgraded features than other properties in the area, you will get much closer to your asking price without having to negotiate a great deal.
Did you know that the art of negotiation can help you gain more overall profit than any feature in the home?
It is absolutely essential to learn the subtleties of negotiation. Make the following two factors your best friends: patience and silence.
Patience will give you an edge by removing eagerness to seal the deal. This calm nature tells the seller you have plenty of interested parties and your well-being is not dependent upon their offer, which will, in turn, make them more eager to close the deal.
Silence will put an unintentional pressure on the buyer to make the deal happen. When you pause to consider their offer and let silence fill the room, often the buyer will renegotiate their terms even before you’ve spoken, just to break the tension.
This is just a small sample of what The Investor's Edge provides. In addition to funding, tools and resources, we also offer unparalleled customer support. Our investment directors, associates, account advisors and loan coordinators will walk you through our process step-by-step. We can also help you learn along the way. We are 100% dedicated to your success and helping you open the door to financial freedom.
Learn how to flip properties with us by attending our next webinar.