Avoid Rehabbing Real Estate Mistakes Using These Proven Strategies

When investors begin rehabbing real estate, many of them make mistakes and cause them to break even on the deal or even lose money. We want to detail the most common mistakes investors make when using this strategy and how you can avoid them.

Here are our top ten tips to avoid the most common traps investors fall into when rehabbing real estate:

1. Do not over improve the property - This is how most people end up going over budget for the repairs. You want to make the property comparable to the other properties in the area. In other words, if the home is in a low-income neighborhood, do not rehab it like it is an upper-income property. 
2. Do not under improve the property - The opposite of the above item is also true. If the home is in an upper-income area, you would not use cheap materials because the property would not compete with the other homes in the area. 
3. Give the market what it wants - In order to be successful with the rehabbing strategy, you must know the area and the properties in the area. If you give the market what they want, selling the property will be much easier and you will be less likely to get stuck with a property. 
4. Avoid termite damage - Make sure you do an inspection prior to closing on the deal. You need to know exactly what you are buying. 
5. Make sure EVERYTHING is in writing - You need to adapt the rule that if something is not in writing, it does not exist. This means everything with your purchase contract, dealing with contractors, etc. 
6. Incomplete estimates from contractors - In order to protect yourself and ensuring that you are under budget, get a completed estimate from your contractors. We recommend getting at least three bids (five is even better) during your escrow period to ensure that everything is as you expected. 
7. Structural damage - Even though you can still make a profit rehabbing real estate with structural damage, this is something that is better left for someone that has experience doing this. If you are doing your first few rehab deals, we recommend avoiding properties with structural damage. Get a professional home inspection done during your inspection period to avoid this trap. 
8. Unpermitted work - Be sure to get building permits done for the work you are doing on the property. If you do not have permits for the property, it can kill your ability to sell the property and you will get stuck in the deal. 
9. Partially and poorly replaced systems - If you are replacing the air conditioner, furnace, plumbing, or electrical, make sure it is done to code and completed the right way. Otherwise, you are going to be asking for problems when trying to sell, or a buyer wanting to sue you because they have a problem later on. 
10. Going over budget on the repairs - This is probably the most common mistake when rehabbing a property. To avoid this, get a complete estimate from your contractors, budget an extra amount for the repairs to be safe, and also do a home inspection to know exactly what you are buying. 

If you follow these steps to avoid the most common traps when rehabbing real estate, you will increase your profit per deal. This is great strategy to make lump sums of money at once that you can use to pay down your bills or use the money to get into larger deals.