Realty411 - Your Source for Real Estate Investment Information CashFlow Express - Featuring HGTV's Flip or Flop! | Page 19

Rehabber and Flipper
By Carl Schiovone, Director of the
East Coast Real Estate Investors Association

P

roperty rehabbing and flipping
continues to be an extremely popular business
model among experienced investors as well as novice investors with no prior real
estate experience. The single
motivational factor causing this
buzz may be hard to put your
finger on, however, there are a
number of contributing elements
that led to this frenzy, including
the many television shows demonstrating how easy it is to have
a big payday. What they don’t talk
about is the inherent risks involved. As
another motivating factor is the poor performance
of traditional Wall Street investments and many
insecure with their job and career growth potential.
However, like any business venture you are considering, success requires an understanding of the
challenges and barriers you will have to overcome;
this realization must come early in your business
implementation. At the core of all successful businesses are a comprehensive business plan, risk
mitigation strategies, and a competent professional
support team that will assist you through your business decisions.

Picking the Right Property
As a rehabber and flipper, you will need to select a
property that is desirable from the prospective of
the typical buyers in your targeted market
area. With this insight, it will make selling
the property at your expected price and
marketing time budget so much easier.
Your goal in selecting a specific
property is to either avoid as many
buyer’s objections as possible or cure
them as part of your rehab plan. A
buyer’s objection can be anything
that can cause the potential buyer to
walk away from purchasing the home
or to offer less than what you were
expecting.
Typical buyer’s objections can include:
• Small bedrooms
• Not enough bathrooms
• Adjacent or near retail or commercial buildings
• Small yard
• On a busy road
• Outdated kitchens and baths
• End of life for roofs, windows, HVAC, etc...

Buyer’s objections come in two forms, curable
(things you can fix) and non-curable (things you
can’t fix). Your goal as a successful property rehabber and flipper is to select properties that have no or
minimal non-curable objections.
Determining Your Offer
In order for your rehab projects to be a financial
success, it is essential that you fully understand the
elements that must be considered when coming up
with your offers, these elements include:
• What will the home sell for when I
complete the renovations?
• What will be the cost of the improvements?
• How long will I need to hold the property?
• What are my holding and operating expenses?
• How much profit is expected?
• Legal expenses to buy and sell the property
(remember, you will have two closings).
• Marketing costs, including real estate broker
commissions to sell the property.
By considering the above elements, it will lead you

Continued on pg. 21

before

In the following section, we will touch upon some
of the most important things you will need to consider to be successful in this business model.
Have Your Capital Budget in Place
One of the most fundamental variables of purchasing your potential flip property is how much
capital you have to invest. Generally, this “Capital
Budget” will determine what markets you can afford to be in and will be at the core of establishing
your investment criteria. In recent years, even as
the lending institutions are creating more attractive
loans for investors, submitting all cash offers continue to provide the real estate investor additional
leverage over a conventionally financed offer. In
many cases, cash offers will be necessary in order
to compete with the other offers that are also being
considered. From the prospective of the seller, an
all cash offer can eliminate the risks associated
with the loan being rejected due to the condition
of the property, low appraisal, or the qualifications
of the borrower, In addition, with an all cash offer,
Title can typically close much faster and for some
sellers that may be worth taking even a lower cash
offer over a bank financed offer.

after

Picking the Right Location
Knowing your targeted market area is essential for
you to feel confident you are investing in the right
location. Having a pulse on the local economic and
real estate market conditions will go a long way
in selecting a location buyers want to move to. In
addition, having a thorough understanding of your
investment area and sales prices will help you set
the stage to understand if opportunities presented
to you are in fact a solid deal. One of the best ways
to gather information on your intended investment
locations is to enlist the help from a local real
estate professional.
CashFlow Express • Page 19