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REHAB/ FIXER UPPER

Rehab can generate tremendous profit. Rehab is basically to buy the property in need of fixing, then fix it up and resell it for a profit. Rehab house will probably be vacant and needs lots of repair. Some houses needs repair inside and out, some may have problems just inside or outside. It is important to estimate what needs to be fixed and how much it will cost. Main goal is to make the maximum cash profit by purchasing a home in need of repair, repairing it and re-selling it on the retail market to an owner-occupant in shortest time.

Even though it can produce nice profit, it requires time and money until it generates profit. Investor don't see the profit until the rahab project is over. From purchasing a house to reselling it to retail market, it can take a long time depending on the house. Investor also needs money to repair and put improvements to house to be marketable. Some rehab investors partner with someone else who has money to put in.

Sometimes finding money is not hard since there are other people who is willing to invest with you or there are banks who loan money. The real tackle is to find a good deal and getting things done in minimum time. Generally it shouldn't take more than 6month for you to cash the profit.

Often distressed, dirty and vacant properties are used for rehab. You are taking property as "as is" condition and how much you pay in the beginning will decide what your profit potential will be. What is the actual value of the house? It is advised not to take the deal with less than 20% profit. Rehabbing is long process and unexpected expense can come up. Before purchasing the house, you have to estimate repair costs, holding costs, resale costs and your minimum profit, then what your resale price will be. After calculation, you can come up with maximum purchase price you are willing to pay. The property, however, should be in the neighborhood that people want to live in.

Investor may or may not need permit to fix the house, the permit can be received at local permit office. You would need to bring the list of repairs and estimated cost of doing those repairs. Before starting the project, you need an inspector to find out what needs to be repaired. Unless you have knowledge for inspecting the house, it is recommended to hire a inspector for the job.

Repair is basically to make the house attractive and functional. Rehabbing is to make structural alterations, make improvements in functioning, make a property safe, give better appearance, landscape, make it more energy efficient. Where ever things are not working can be fixed such as broken window to central heat system. Remodeling may include renovating kitchen and bathroom, replacing floors, landscaping doorway, new roofing, adding a garage and many more. Cleaning also can be done to make house more appealing.

During doing the project, you may work with several contractors and subcontractors such as Inspector, plumber, electrician, carpenter, construction person, painter, sheet rock man and designer. It is important to make plans step by step so different areas of work doesn't affect each other. If careful planning is not done, you could waste precious time. You might have to wait for one thing to finish to do the other thing. You might have to do it over again if some things were't done in order. Also, if contractor and subcontractor are not available to come on scheduled time then you may have to wait until you start working on it.

There are government programs available for rehab. The U.S. Department of Housing and Urban Development provides loan for rehabilitation of property. It is called Section 203 (K) rehabilitation loan. You can get this loan for just rehabilitation part or, for purchasing a house as it is and rehabilitating it. For detail, visit HUD 203(k) Rehab program)

 

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