Three Terrible Lessons From a Rehab Gone Wrong
Fixing and flipping houses definitely has its learning curve. Like any other investment, it is not an endeavor one enters into lightly. The best flippers achieved their success over years of acquiring essential negotiating, rehab planning and marketing skills and they have encountered many obstacles along the way.
However, Do Hard Money strives to help all those interested in real estate investment put their best foot forward and not have to go through the costly mistakes many others do. So, we’re giving you the top three terrible lessons learned from a rehab gone wrong. This list will help you learn what to focus on and what to avoid when you plan and execute your rehab.
1. Be on Top of Things
When you invest your money in anything, you need to be as involved as possible! It’s your investment…be invested! This means…
- Ask Questions – If you don’t understand something, don’t be afraid to ask questions or request an explanation until you fully understand; especially when it comes to costs, fees, requirements and timelines.
- Be Aware of the Steps – Be organized and plan every step of the process into a timeline so that you know what to expect and aren’t left wondering what to do next.
- Understand Your Responsibilities – This goes along with step #1 – ask questions to ensure you know exactly what you need to do and provide to the lenders, realtors and contractors to speed up the process.
- Communicate! – Make sure you’re in constant communication with your hard money lender, project manager, realtor and contractor throughout the stages of your fix-and-flip property. Expectations need to be set and clear, otherwise you will definitely be left with a mess on your hands.
Terrible Lesson Learned:
Victoria C. went with a hard money lender recommended online. Being a first-time fix-and-flipper, she assumed that she could leave the details of the loan and property rehab in the hands of the lender and everything would turn out just fine. Unfortunately, this was not the case. The loan didn’t get processed for weeks due to lack of communication and when the time finally came for Victoria to receive funding and snag the property she wanted, the lender backed out at the very last minute, leaving her in a terrible position. She then turned to Do Hard Money and was able to receive funding quickly, purchase the property and rehab it after all. Click below to hear her story!
2. Don’t Rush
When it comes to timelines, make sure that they aren’t too aggressive or unrealistic. An excellent hard money lender, like The Investor's Edge, will walk you through a realistic and well-paced timeline and provide a project manager to ensure the work gets done on-schedule. If you cut corners or skimp on the rehab process, trust us, it will not go unnoticed by potential buyers. You can’t afford to be in a rush when it comes to the rehab process. A fantastic rehab can be executed in a time frame of a few months without rushing the work.
Terrible Lesson Learned:
A client went with a hard money lender who sped up the rehab process and sacrificed a great deal of quality to try to make an unrealistic deadline. Instead of restructuring the time frame to include more realistic goals, this lender tried to force making the deadline by cutting any double or triple-checking of the rehab work. As a result, when the rehab was finished it failed inspection and left the client in a terrible position. Needless to say, many unpleasant conversations followed between the client and the lender.
On the other side of the spectrum, The Investor's Edge has a team of professionals who set realistic timelines and due dates for the execution of a quality rehab. Thanks to this timeline, Casey C. was able to perform an incredible rehab on his home. Click below to hear his story!
3. Identify Solutions
If things go wrong (and if it’s your first flip, there are bound to be some obstacles), make sure you don’t panic and don’t hyper-focus on the problem. If you focus too much on the problem, you can’t see the solution. Be someone who goes into ‘fix-it’ mode and focuses on options and solutions to every issue.
If there are problems with the loan application:
- Focus on what you can control – If you have poor credit, a good hard money lender will still work with you. If you have a criminal background or current bankruptcy, though these have happened to you and are out of your control to alter, you will have trouble obtaining a hard money loan.
- Ask what’s missing – Be in constant communication with your lender and find out what they need from you to expedite the loan process.
- Provide any information that the lender’s need – If any required paperwork is missing, track down what your lender needs and get it into them asap so that the loan process doesn’t take any longer than it needs to.
If there are problems with finding a property:
- Ask your lender for help – a good lender will give you excellent finding tools and resources.
If there are problems with the rehab:
- Get in touch with your contractors, project manager and lender – Keep up the communication to ensure that all goes smoothly. If there’s an issue, ask what you need to do personally to help solve it. Hold others with action items responsible and follow up with their progress.
If there are problems with the resale:
- Get in touch with your realtor – Brainstorm together what needs to be done to help generate interest in your property.
- Take initiative – Start your own marketing campaigns. Go on social media and advertise your property for sale to build up some buzz.
Terrible Lesson Learned:
Laura R. had an investor pull out of the deal just days before they were about to close on a prime property. Not only was she in danger of losing the deal, but also $13,000 of her own money. Instead of fretting about things she couldn’t control, such as the investor pulling out and leaving her in a terrible predicament, she focused on what needed to be done to make the deal work. She rushed to find a lender who could fund the deal quickly and found The Investor's Edge, who saved the deal for her and helped her gain a $56,000 profit as a result. Click below to take a look at her amazing story!
Now that you’ve learned these important lessons, you can get started on your own path to real estate investment success! The Investor's Edge is ready to provide you with your very own team of experts which can help you get started, regardless of what level of REI experience you have under your belt.
Find out how you can flip properties with us by attending our next webinar.