Introduction

Part I: Laying the Foundation for Successful Rehabbing. Chapter 1: The Benefits of Rehabbing Real Estate. Chapter 2: Do You Have What It Takes for Rehabbing Houses? Chapter 3: Things to Avoid When Rehabbing Real Estate. Chapter 4: Why People Invest In Real Estate Part II: Fiddling with the Financials of Property Rehabs. Chapter 5: Managing Money during a Rehab Chapter 6: Funding Your Rehab

Chapter 7: Stressing Facts about the Financial Criteria Involved in Real Estate Investing

Part III: House Hunting with an Eye for Rehabbing. Chapter 8: Looking for a Rehab Chapter 9: Hunting for Houses in Your Target Area. Chapter 10: Inspecting the Property with an Eye for Rehab. Chapter 11: Benefits of Rehabbing Houses

Chapter 12: Closing In on Foreclosure Properties as Potential Rehabs

Part IV: Fixing Up Your Fixer-Upper. Chapter 13: Prioritizing and Planning Your Renovations. Chapter 14: Giving Your Property a Quick Makeover. Chapter 15: Perking Up the Curb Appeal.

Chapter 16: Dazzling the Crowds with Updated Kitchens and Baths.

Part V: Sold! Sell Your Rehabbed Home.
Chapter 17: Marketing Your Home.
Chapter 18: Staging a Successful Showing.
Chapter 19: Negotiating the Sale to Maximize Your Profit. Part VI: House Rehabbing Stories
Chapter 20: House Rehab Successes
Chapter 21: House Rehab Sob Stories
Chapter 22: ABC’s of Rehab Houses

Chapter 23: Lease to Own Property Investment: Strategy for Surviving a Slow Market.

 

Introduction

Welcome to Real Estate Investing!! I am very pleased to share relevant information for rehabbing houses and tactics for real estate investment strategies for the long term. I too am a rehabber along with being a landlord and have a true passion for real estate. There is nothing better than knowing that I am creating a future for my family through a tried and true investment strategy such as real estate. Furthermore, there are so many avenues of real estate that I find exciting and fascinating not to mention lucrative but what I specialize in is rehabbing houses and doing quick turns although I have done lease options for my properties and have been successful at it. My reason for sharing this book is that I noticed that many would be rehabbers have gotten themselves in over their heads because they failed to do their homework and hence the reason why I have written this real estate investing e-book to help out my fellow rehabbers and possibly save them time and money. I only wish that I had this information when I first started out, it would have saved me many a heartache.
In my humble opinion, understanding the bottom line in real estate investment takes experience and education which took me an inordinate amount of time to truly understand the long term ramifications involved in actually being successful. I believe in the power of sharing and the joy of learning and I want to assure you that I will continue posting invaluable information on my blog (http://www.hudhomeslawrenceville.com) to include video to keep YOU (the real estate investor) informed on any and all educational events that I attend and will gladly share my hard earned knowledge with folks that would like to keep updated on the latest real estate strategies. Happy investing and get to Rehabbing!!

Regards,

 

Renee Stein

 

http://www.hudhomeslawrenceville.com/

 

Part I: Laying the Foundation for Successful Rehabbing. Chapter 1
Benefits of Rehabbing Real Estate

The obvious benefit and sought after benefit of rehabbing real estate is the profit. This is one incredibly tangible benefit, particularly when the profits are large and quick to come your way. Of course there are multiple risks. Most ventures that offer high profit also come with a high degree of risk. Money, however, is not the only benefit that can be associated with rehabbing real estate though it is certainly the one on most investors' minds when they get into this line of work.

Let's talk profit first. Profit is the one reason that most people get into this business. The days are long and the work is hard. This is definitely not the type of work one would ordinarily undertake for the simple love of getting one's hands dirty. This is real work that leaves you bone weary at the end of the day. However, when all the work is done and you get around to making the sale, you will find that the profit involved in a successful rehab is well worth the effort you've put into the process.

The good news is that the savvy investor can still manage to make money even when the situation may not work out quite as planned. This is yet another benefit to rehabbing real estate. If the rehab doesn't work out, there is always the option of leasing to own the property or renting the property out. The profits in these situations are considerably less than a straight out rehab but it can prevent financial ruin that is often the risk of a rehab gone wrong. The fact that there are options and that you aren't necessarily left ruined at the end of a bad rehab is definitely a benefit. There aren't many types of investments that allow you the option to save yourself the way real estate does.
One of the intangible benefits of rehabbing homes is that you are in essence working for yourself. In other words you do not have to punch a time clock or worry about overtime (at least not on your part). This can be a bad thing too if you lack the discipline required to get the job done. However, most of us will view this as a huge check in the pros column when deciding whether or not to take the plunge into the wonderful and frightening world of real estate investing.

Even though this is a business that requires a lot of work in order to turn an attractive profit there is some satisfaction at the end of the day involved in knowing that you are working for yourself and not to make someone else wealthy or in order to punch a time clock. That feeling of satisfaction is one that you should hang onto when the brand new toilet you've just installed becomes a geyser. Of course there are mistakes along the way, what other job keeps you on your toes quite like this one?

Real estate investing, home rehabbing in particular, can be one of the most frustrating types of investments a soul can pursue. At the same time it can also be one of the most rewarding mentally, spiritually, and financially. This is something you should keep in mind when deciding whether or not this is the right path for you.

Chapter 2
Do You Have What It Takes for Rehabbing Houses?

There are many questions that should be asked before embarking upon a career of real estate investment. The first and foremost question however should be whether or not you are truly committed to making real estate work for you. This is not a business for the faint of heart or the weak of mind. In order to truly turn a profit you must be at times quite stern when dealing with buyers and sellers but ethical to a fault when it comes to the work that must often be done in order to get a property in sellable condition.

The reason a serious commitment is needed in order to make real estate work for you is simple. There will be ups and downs along the way. The stock market experiences rises and falls on a regular basis, just as you cannot dump all of your stock over one bad day, the same holds true even more so in the real estate investing arena. Property values in general rise gradually over time. This means that even if the values in a community falter, chances are that they will eventually recover over time. This is what usually causes investors to fail, the unknowns and the financial risk which are never truly thought out because most folks do not understand all the details that are needed to be successful in rehabbing houses and understanding the markets and the value that it brings be it high or low.

Those who bank on the slow and steady growth in the value are referred to as buy and hold investors. These investors are truly committed to their investment. Some of them elect to hold the property as a vacation property while others opt to earn an income on the property by renting it out to other families or vacationers, whatever their choice may be.

This is a great way for many people to enjoy the luxury of a vacation property without absorbing all of the expenses involved in owning a vacation property as the rentals will help compensate some of the costs when the owners (investors) are not in residence. This is a fairly common practice in high demand tourist areas in which people often enjoy vacationing. These types of investors are what some people refer to as serious real estate investors though all real estate investors need to take their purchases seriously. Those who own rental properties must also be committed to making their investments work for them. Rental properties are not a 'hands off' type of investment, as they will need to be maintained in order to remain in demand by tenants. You must also make constant efforts to keep these properties managed and filled along with remaining certain that you are collecting your rent each month and that the properties aren't falling into a state of disrepair or abuse by tenants.

Many investors retain the services of property management agencies in order to handle the minutia of month-to-month details and collections. This is a great idea whether you have one lone rental property or a vast portfolio of rental properties. Even better however, is the fact that if you keep your rental properties in reasonable repair throughout the years they can become liquid assets. In other words, they may actually pay for themselves a few times over if you invest for the long-term rather than focusing on the moment.

No matter what type of real estate investment you intend to have it is important that you are prepared to make the commitment to profit or profitability that is necessary in order for your venture to be deemed a success. In conclusion, a serious mindset and unfailing determination to make a profit and weather the highs and lows of real investing is what ultimately will make you success.

Chapter 3
Things to Avoid When Rehabbing Real Estate

Rehabbing property is rising in popularity thanks to TV shows such as “Flip This House” as a form of real estate investing. The truth of the matter is that this is one of the more entertaining methods for many investors that are simply 'itching' to get their hands a little dirty. The sweat equity involved in these transactions, while attractive, can also be daunting when skills are inadequate and out and out dangerous in some situations to the point where financial calamity is right around the corner about to cause chaos in your once mundane existence.

If you are one of the many around the world who consider the appeal of rehabbing property with huge dollar signs in your eyes, you should take care to avoid the following things in order to minimize your risks while maximizing your potential for success.

1) Do not fail to have a qualified inspection of the property before any money changes hands. If you do not have any idea of the type of work that needs to be done than you cannot possibly make an educated estimate of the costs involved in rehabbing the property.

2) Do not underestimate the budget for repairs on the rehab. This is one of the most common mistakes that even seasoned professionals make and it can mean the difference between a profit and a loss on the property if you aren't careful and do not stick to the planned budget.

3) Do not overestimate your abilities. This is another common mistake. The fact that you've seen something done on television doesn't mean that it is something you can do on your own. It costs more money and time to have someone come in and repair your mistakes than to have had a professional do the work from the beginning. This doesn't mean that you can't learn how to do some of the work or that doing so would be cost effective. The trick lies in determining where your skills and abilities can really take you rather than where you hope they will take you. Plumbing, electrical, and structural work are generally best left to the professionals unless you have specific experience or training in these fields.
4) Do not fail to hold yourself accountable to your timetable and your budget. Real estate investing puts you in the bosses seat and while that is often simple when it comes to driving others, we often have a bit of difficulty when it comes to holding ourselves accountable for time and money along the way. Unfortunately, failing to do so can be a very costly blunder and eventual demise or your real estate empire.

5) Do not forget to keep up with receipts, bills, etc. and reconcile the facts and figures daily. It is far too simple to allow a couple of trips to the local home improvement center escape careful scrutiny. Add a couple of these trips per day and you could easily find thousands of dollars missing from your budget with no paper trail to explain the transactions. You could also find that some tools will not work or be needed for the project. Those items cannot typically be returned without the original receipts.

6) Avoid having too many chiefs on the project. If this is your ball game then you need to run with it rather than having 10 people giving contradictory orders. You should schedule meetings regularly to discuss progress and any adjustments or changes that may need to be made along with timelines that need to be followed or else start looking for a replacement.

7) Avoid poor planning. This is one step that is the difference for many would be house rehabbers between success and failure. You should plan out every step of the project in an order that makes sense. You do not want to paint the ceilings or walls after you've installed new floors. Nor do you want to rip out walls in order to replace plumbing after you've painted them. Plan things out in the proper order and allow a day or two between subsequent projects in case extra time is needed. The last thing you want to do is pay a group of contractors to stand around waiting for the paint to dry so they can begin the next step in the process.
There are risks involved in any type of investment. While real estate is one of the greatest things in the world in which people can invest, there are still risks involved. Following the advice above however can significantly lower those risks and give investors the opportunity to have great expectations when all is said and done. Whether this will be your first rehab or your fortieth rehab there is much that can be reviewed in the steps above that will reaffirm many of the things you've learned along the way.

Chapter 4
Why People Invest In Real Estate

Many people know that real estate investing is very lucrative. For that reason alone, it will make people want to get their fair share of the pie. They know that this is a great way to build wealth, not only for them, but they can also pass it down to future generations.

In addition to having monthly rental income, there are other factors that contribute as to why people invest in real estate. Below are details that should be taken into consideration for the many reasons that one invests in real estate.

· With appreciation of rental properties, there will be increased value. In turn, this could help with the selling and reinvesting in properties that already have a higher value. Appreciation of rental properties can also make way for an equity line of credit for future use.

· Speaking of equity, you as an investor can invest in sweat equity, which involves making improvements to your real estate property. It doesn’t have to be so far out where you end up spending a lot of money.
This can help the value of your property go up faster than it would have if you had not made improvements. So, if you spend $3,000 on cosmetics and miscellaneous items, then the value of the property could be double or more of the amount you spent on improvements.

· Being a real estate investor during inflation times is not necessarily a bad thing. Even though rental payments increase during this time, your mortgage loan payments should remain the same. Because of this, you can have an increase in cash flow.

Another thing about inflation is that you can also gain more renters (if you have vacancies) because some people may not be able to secure mortgages during that time. Since you will have a greater demand for renters, the rent will also increase. This is part of the agenda of supply and demand.

· Using “Other People’s Money”, or “OPM”, is a good reason for people to invest in real estate. You can find a bank that will secure a loan for you for your real estate investment(s). The better your credit is the better chance you have of securing a good fixed rate loan with low interest rates.

You can also look at zero-down loans, but that can be more risky. You would have to pay more in your mortgage payments because you didn’t include a down payment. So when the property appreciates, it will benefit you along with the monthly cash flow.

· Real estate investing is considered a business. You can use the expenses from it and deduct them from your taxes (see your local tax advisor.) Anything that you purchased had repaired, any fees and anything else related to the investment in question is tax deductible but you must check with your tax accountant and be absolutely sure you are following your tax accountant’s advice to the letter.

Even if you have properties that are out of the regional area where you have to travel, those expenses can also be deducted from your taxes. If nothing else, being able to deduct expenses from your taxes is like a marriage made in heaven.

· Have you heard of getting cash that is tax free? Say you have an increase in rentals and you end up having a positive cash flow. The surplus can be used for other things. If it’s the right time, you may think about wanting to refinance the rental properties.

If you do that, you could secure a higher mortgage about $20
- $50,000 more than the original. You would pay off the initial mortgage, and have a nice surplus afterwards. The surplus would be considered tax-free money.

· The 1031 Exchange is named after Section1031 in the Internal Revenue Code. It discusses how real estate investors can hold off on capital gains taxes when selling one of their properties. There are three conditions that have to be met before the 1031 Exchange can go into effect:

1. It is a real estate property investment and not a main residence for the investor.

 

2. The real estate property can be swapped for a property of the same or similar kind.

3. In regard to replacement, there must be certain time frames in place and adhered to.
When an investor uses profits from another property sale and invests them in another property, they can hold off on capital gains for future real estate transactions. More than likely, the investor will work on getting additional equity and more income and profits from additional property rentals.

Part II: Fiddling with the Financials of Property Rehabbing. Chapter 5
Managing Money during a Rehab

Money management during any real estate investment venture is an essential skill. If this is your first time rehabbing a property it is probably more important on the first rehab than any other as you need to fully realize how much things cost and how quickly those expenses can up. It is so simple for the budget on a house rehab to get completely out of control. For this reason you need to take control of the financial situation from the very beginning. You have to understand the importance of labor, materials, holding costs and overruns can have on your rehab either in a positive way (if you are truly organized) or in a negative fashion if you are not organized.

Begin by establishing a realistic budget for the entire project. If you find yourself spending more money in one area than you had originally planned you need to either revisit the initial budget and plan for adding more money to the bottom line or you need to make cost lowering adjustments elsewhere along the way to recover the excess. You will need to have a firm idea of the projects you are going to tackle, big and small, as well as the costs involved in each project. Take a walk through a hardware store and get a firm grasp of today’s prices on the hardware, equipment, and supplies you will need to complete the job.

Use contractors when necessary but sparingly. There are times when it will cost much less to use a contractor on a project than to muddle through on your own. There are also times when local laws require a contractor. You need to use contractors for these times but you need to avoid paying the princely labor costs contractors charge for things that you could easily do yourself. You never want to spend a penny on a rehab that you don’t need to spend and labor costs are a huge budget buster. Of course, you can talk to entrepreneurial contractors and state your vision and explain that you will be a repeat customer and with repeat business, lower labor costs are expected from them. It will take some time to find the ones that will believe in your “vision” of creating a production line of rehabs but once you find them, communicate effectively and you will become highly efficient at your chosen craft.

Get permits first and up front. Time is money when you are rehabbing a house and once you start the work that time is precious. Make sure you have all the permits you need and that they are paid for before you begin the project in order to save time and money after the project has commenced. Never has the bottom line become so important as when you have begun to rehab a house.

Furthermore, create a habit of accounting for every penny spent throughout the day at the end of each and every day. This becomes a good habit to have for your first and all subsequent rehabs. By doing this you will have a solid grasp of how much money you are spending as well as how quickly you are spending it. You will need money to spend on little things throughout the course of the project so if you are spending money too fast up front you may not have the money needed to take care of the small details that mean a lot when all is said and done.
One huge way to better manage your money during a house rehab is to make a conscious decision and consistent effort to work according to your tastes. Chances are quite good, especially for a first rehab that you will be working on a house for those who have less financial means than you may have. For this reason you need to keep your project within the budget of your buyers. This will save tons of money. In other words a lower income community cannot absorb the costs of granite, marble, and hardwoods in most situations so don’t go to that expense.

In order to turn a solid profit when rehabbing a house or doing any type of real estate investment you absolutely must have a firm grip on your money, where it is going, and what your plans are for the money. The less money you spend the more money, in many cases you stand to bring home in profit. Spend the money you need to spend in order to improve the value of the home but avoid luxury expenditures that aren’t necessary for the neighborhood or the home in question in order to maximize the potential profits you can bring home.

In conclusion, the bottom line is the key to successful house rehabbing and by understanding the fundamentals of labor, materials, holding costs and overruns which should give you a firm grasp on the final outcome which is a nice profit for each and every rehab. Happy rehabbing!!

Funding Your Rehab

Real estate investments are quite expensive. Not only do you need the money to purchase the property you will be rehabbing but you will also need money for the improvements, repairs, and renovations that need to be made along the way. Unfortunately, the real estate business is a tricky business and there aren’t very many traditional lenders that are willing to go full out in support of your real estate investment business venture.

This means you are going to have to either fund a good percentage of the expenses yourself or you are going to have to find some other means of financing your house rehab. First things first, the less you pay in interest the more money you bring home. You do not want to max out your credit cards in search of profits from a house rehab if it can be avoided. Merchant accounts aren’t much better but they can help you keep better track of exactly how much money you are spending on the rehab and some will even give you 90 days same as cash (this is great if you can complete the process within 90 days).

It should be said that these aren’t methods that are endorsed by the writer but they are definitely possibilities when it comes to funding your house rehab. The best-case scenario is that you would have the money to play with and assume no real risk in the house rehabbing process but very few people trying to get started in real estate investing have that luxury.

That being said, one way that is extremely risky (especially if you are nearing retirement age) is to cash out your retirement funds. This is not attractive for many reasons not the least of which is the facts that there are hefty penalties for doing this and you are risking your retirement security. It is an option however if you are in a bind for your rehab. Furthermore, if your rehab is successful than its water under the bridge and the money can be returned or reinvested and the profit from your rehab can then help fund subsequent rehabs or other types of real estate investments.

If you discuss things carefully with your family and decide that you are all willing to take the risk you can also risk your home by taking out a second mortgage for the funds. Again this is not the preferred method because the assumed risk is great for the security of your family. It is very important that everyone involved be aware that rehabbing houses is a risky investment. Not only is it risky because you aren’t experienced but the real estate market is fickle. Your house could sit for several months requiring costly carrying costs before it sells.

Forming a partnership is another way to share the risks and help lighten the burden when it comes to rehabbing houses. Keep in mind that this is a stressful business venture and should be treated as such. For this reason a volatile or fledgling friendship may not be the best risk for a venture such as this. If you do choose a partnership you need to carefully discuss the type of financial and labor investment that is expected of each partner and the share of profit that each partner expects to receive as well. You should also consider carefully whether you are willing to risk the friendship for the sake of profits or would you rather go with a partnership that isn’t a close friend (most real estate investment groups have people willing to help with the financial side and assume the risk for the lion’s share of the profits).

Banks will typically fund a portion of the property costs if you can come up with an adequate down payment and show them a well thought out business plan. Do not rely on banks however if you have poor credit, lack a business plan, or do not have a sizable chunk of your own money to invest in the venture.

Stressing Facts about the Financial Criteria involved in Real Estate Investing

It can’t be stressed enough that when you’re starting out, don’t rush to get the first piece of property that you see. It’s important that you conduct your due diligence with everything regarding real estate investing.

Even though it is a lucrative and profitable business, you can also lose money if you don’t work it properly. Don’t listen to all of those stories that you hear about people making lots of money “overnight” with real estate investing. It takes more than a day to start seeing a profit. It can take more than a week to actually get a property that you want and can afford to get.

If you take your time and look around, you may be surprised as to how much is available to you in terms of real estate properties especially in today’s market. There seems to never be a shortage of places where you can find a place to use for a profitable investment.

Once you get into real estate investing, it’s important to stay in it for the long haul. That’s the way you will create wealth. Regardless of whether the market is up or down, you must be willing to weather any storms that come about. There will be times when there are down markets, but you can’t give up and throw in the towel otherwise you will never achieve your objective.

It seems like those that are getting their feet wet want to get in when the iron is hot, but when it gets cold, they want to bail out. Gaining lucrative wealth from real estate investing comes with staying the course. Even in downtimes, you can still profit. There will always be people that are looking for a place to live especially with the ever important credit scores that dictate getting a good place to live and with the credit markets being so tight, it has become difficult for the potential home owner in today’s real estate market.

As far as rentals are concerned, you will be able to increase rent as time goes on. This will help you produce a surplus while you are still paying the same amount on your mortgage loan. This of course, can happen if you have a structured loan payment that doesn’t fluctuate during any given period such as the notorious adjustable rate mortgages (ARM.)

Getting into real estate investing can be a good experience for you. You would be learning one of the best ways to build up wealth and it has been stated many times over, that most millionaires in the United States are created through real estate. How wonderful of an opportunity is that?

Furthermore, since you are not Superman or Superwoman, don’t expect to do all of the repairs yourself. There may be