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5 Tips To Help Maximize Profit On Rehab Deals


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As a rehabber the focus should always be on your bottom line. If you don’t have an eye towards maximizing profits on every deal you will be left disappointed with the results. The goal isn’t just to rehab a property but to make it worth your time. Maximizing profits starts even before you make an offer. You need to have strict criteria in place that will help choose the properties you pursue and those you walk away from. Doing a few things before, during and even after your rehab is completed will help you get the most out of them.  Here are five tips to help you maximize profits on every rehab deal.

  • Establish Buying Criteria. One of the things that gets rehabbers in trouble is pursing every new deal that hits the market. While you never want to completely dismiss a property you need to know where to draw the line. Maximizing profits starts with having a clear understanding of your goals and the types of properties you want to pursue. Start by making of list of desirable markets, the purchase price range, number of units and the amount of capital you have available. At the same time make a list of markets and scenarios that are completely off limits. There are times when a property in a certain location with certain problems is more trouble than it is worth. By taking on deals you don’t really want you avoid the deals that are in your wheelhouse when they hit the market. Some of the best deals you will ever make are the ones you don’t do. Before you can move forward you need to know your buying criteria.
  • Follow The Numbers. One of the most difficult tasks that rehabbers face is keeping their emotions out of their decision making. There are plenty of instances when you may have had your eye on a property for weeks only to find yourself in a bidding war. Instead of thinking that you have to make the property yours you need to always revert to the numbers. There is a pretty simple formula that most successful rehabbers follow. The hard part is following it. Your profit is derived from the end sales prices subtracted by the cost of repairs and the purchase price. Obviously there is a lot that goes into these areas but oftentimes the numbers are in black and white just screaming off the page. The quality of the work you have done helps but it probably won’t make as much of a difference as you think. Your finishes or the flooring you choose is not going to yield 20% more than the current comparable sales in the area. Always take an objective look at the data and the numbers in front of you then make your decision.
  • Do The Right Work. To maximize profit doing quality work is not enough. Quality work and the right work go hand in hand. Doing good work on the property should go without saying. However the work you do has to fit the market. You need to leave your personal preferences and feelings out of your decision making. You need to look at what is on the market and what will generate the best return. You may personally like a pool with a hot tub but if the yard is small this will not be the best use of the space. The same thought process should be carried over to the interior of the property. You may personally like a certain type of fixture or appliance but if it doesn’t fit the market it won’t yield the return you expect. Sometimes over improving a property is just as bad as under improving. Not every improvement you make will give you a higher return. Study your market and make sure you do the right work.
  • Don’t Wait To Market. There are multiple schools of thought on when you should begin marketing your property. Some investors start as soon as they take ownership. Others don’t want to do anything until after the work is completed. Every scenario is different but the sooner you start your marketing the easier it is to find a buyer. You can do the best work you have ever done but if you can’t sell the property it won’t make a difference. Give yourself plenty of time to promote the property on social media, your personal website and through any word of mouth contacts that can be helpful. Even if you want to use a real estate agent you can start the process on your own. The more people that know about the property the higher the demand which in turn improves your bottom line.
  • Hire A Real Estate Agent. With every rehab deal you need to know the best places to spend your money. Sure, there is a chance you can sell the property on your own and save on the commission but in most cases the opposite happens. Instead of using all of the marketing resources that a real estate has you will attract a limited amount of buyers. Whatever you think you are saving in commission you really lose with the reduced sales price. Additionally a real estate agent takes care of all the little things you don’t know how to do or don’t want to do. Instead of taking time out of your day to show the property your real estate agent takes care of this. Instead of negotiating with the seller your real estate agent will work towards getting the highest price. When you are selling a rehab you should always let a professional real estate agent do their job. Spend money and let your real estate agent maximize your bottom line.

By following these five steps you can get the most out of every rehab deal. The extra profit will help give you the jump on your next deal and help keep you motivated to work even harder.

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