5 Common House Rehab Mistakes You Need to Avoid

The real estate rehabilitation industry is one that has the potential to be incredibly lucrative. However, everyone has to start somewhere, and to become a successful rehabber, you are going to experience some learning curves along the way. Although it’s impossible to fully avoid making mistakes in this business, here are some of the most common errors investors make as well as tips to avoid them.

5 Common House Rehab Mistakes

  1. Improperly calculating ARV. One problem that many new investors make when calculating After Repair Value is that they look at the list prices around the area as opposed to the actual sales prices. You can list a property at any amount that you want but the only way you are going to close the sale is if you find a buyer that is willing to pay that price. Additionally, if the person is financing the purchase (as the large majority of buyers will) an appraiser must appraise the home for your asking price as well using reasonable comparable sales. Be sure to research actual sale amounts--including seller contributions--and not just the prices listed.
  2. Under-estimating repair costs. When purchasing a property, it is incredibly important to have a very good idea of how much time and money it is going to take to make the necessary repairs. Always do your due diligence when estimating repair costs for a property and make sure you research the amounts and don’t just pull the numbers out of the air. As a general rule of thumb, it’s not a bad idea to expect repairs to both take longer and cost more than you initially think they will--always allow room for the unexpected.
  3. Over-improving the property. Here’s yet another aspect of the rehab process that you need to do your research and due diligence on; be sure to research the surrounding neighborhood of the property you are planning to rehab. If you make expensive repairs and enhancements to the property that are way above what the surrounding properties have, you’re going to have a hard time getting that extra money back when you put it on the market for sale.
  4. Trying to do it all yourself. As a real estate investor, you probably have a wide array of skills that you can use to make improvements to your investment property. However, you have to take into account the amount of time you will be spending and whether it would be better to contract out the work. Yes, it will be more expensive to hire a contractor to make the repairs, but doing so will allow you to focus more time and energy on additional properties and ensuring your current projects are on time and heading toward success.
  5. Not rehabbing in sequence. It’s important to have a plan for the repairs you are going to make before just diving in and starting on the project. For example, you need to ensure that any structural issues are resolved before you start working on cosmetic repairs. If there are any major problems (such a roof leak or foundation issue) those should be fixed before moving on.

Avoiding these five common house rehab mistakes will help you in the long run when it comes to your real estate investing journey. Remember, everything is a learning experience, and we’ve all made mistakes. Fortunately you have investors like us that can help you avoid some of the more common ones.

Are you just getting started in real estate, or are somewhat new and have some questions? Catalyst Funding is here to help! We have a team of experienced investors that can offer a wealth of knowledge and get you on the right track to accelerate your investing future. Give Catalyst a call today at 832.648.3626!

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