Rehabbing Properties For Fun VS Making Profits
Can real estate investors rehab properties for both fun and profit? Real estate investors can and do rehab, rent out, and flip properties for both fun and profit. Most try to simultaneously do it for both. However, don’t let the lines become blurred because that is when things become extra challenging. Firstly, it is essential for investors to really know why they are in the real estate business, and secondly, how that understanding changes the best practices to help them meet their goals. 7 Real Estate Investor Mindsets There are actually many different reasons that individuals choose to invest in real estate: 1. Money (income and wealth building) There may be many more reasons individuals get into real estate, as well as many combinations of these drivers. The Challenge It can be difficult to accomplish all of these at the same time because these different drivers, aspirations, and goals can often contradict one another. For example, what it takes to make the most money may cramp your inner interior designer. Short term monetary gains can come at the sacrifice of long term ones. And giving others the maximum amount of help can come at the cost of your own finances. Because of this, it is vital to understand your purpose and priorities, and to differentiate your indispensable values from “flexibilities.” A great example of this is remodeling and updating lower end rental units. The truth is that in many cases, modest rehabbing won’t change the numbers for the better in the short term. Updating the plumbing, adding central air conditioning, and putting in new tile may not increase monthly income by a single cent. It may not even lift the appraised or resale value. However, this it not to say that it isn’t the right thing to do or that it isn’t a good move for sustaining your rental income and optimizing net income for the long term. So do you invest the capital with the long term hold and tenant quality of life in mind? Or do you hold onto those dollars, invest them in another property, and defer the maintenance for the next buyer to deal with who might tear the building down anyway? What about high end house flips? In many cases, investors needlessly splurge and spend thousands of dollars on luxury properties, which will only be gutted or torn down by the next buyer. In other cases, they don’t go overboard enough. At the very top of the market, there is a clear disconnect between appraised value, square footage, bedroom counts, and what truly affluent buyers are willing to spend for a property which elevates their prestige. Hanging a Ferrari on the wall may seem like overkill to one buyer but could be the one thing that grabs the attention and closes the deal for the next. The extremeness of rehabs is also about branding and crafting an extremely expensive (but valuable) calling card for the rehabber. For some investors, this is what drives them to embrace real estate. Others may struggle with justifying engaging in ultra-expensive property deals. The 5 Keys To Winning 1. Securing the right advice To achieve your goals through real estate, you will no doubt need coaches, advisors, and access to knowledgeable partners. However, they can only advise and direct you well if they are the right fit and believe in your goals. Seek out those that are experts and best equipped in your desired niche. 2. Planning Getting from your A-Z is going to require a plan, especially for those with aspirations which can often contradict each other. Formalize one. 3. Business Model A real system can ensure that you, others you work with, and those that work for you stay on track for what you really want out of real estate. This applies to how you evaluate deals, the culture of your operation, the markets you’ll operate in, and the quality of materials you’ll work with. 4. Daily Decisions Your core and ultimate vision should be visible daily and all decisions should be measured against it. If you are not sure what to do, ask which choice will take you closer to your main goal? Remember, how you do anything is how you do everything. 5. Run Multiple Verticals In some cases, those with very different objectives may find it wise to run multiple verticals at the same time. You may not be able to run a sustainable business and be as charitable as you like under the same brand or with the same properties. Separating these ventures might help expedite both missions.
2. Doing good and helping others
3. Fun
4. Artistic expression
5. Security
6. Curing boredom
7. Creating a legacy