Remodeling an investment property and then selling it on is a very common strategy nowadays and one that has attracted a lot of investors. Some will remodel and sell immediately, but others will remodel and hold the property for a couple of years after having installed tenants.
The term “you make money when you buy” is well known because when involved in property investing it is advantageous to buy the property at the cheapest possible price. This attitude does upset some sellers, but on the other hand there are hundreds of sellers who ‘need’ or ‘want’ to quit a property very quickly and a cashed up investor is just the person they need to help them out of their predicament.
The question then is, “where do you find such properties?”
There are hundreds of properties that come on the market every year where the owner is prepared to sell below market value. Of course there are circumstances that cause this situation and they range from:
· A job transfer
· A marriage break up
· An estate
· A financial crisis
· Plus other forced situations
When these situations occur the owner is more than happy to sell below market value because it suits their situation to do so and they are prepared (sometimes happily other times not) to wear the cost of the lower sale price.
If you are buying the property to renovate then you are well in advance if you can knock say 15% off the market value at the time of purchase.
Say you bought a property for $170,000 and it was worth $200,000, you spend $45,000 on a quality renovation which takes 3 months, and you sell it for $295,000, you have made a handsome profit – $80,000 less costs of sale and purchase.
On the other hand if you paid the full price of $200,000 and did the property renovating at $45,000 and sold for $295,000 you have only made $45,000 less buying and selling and costs, making a lot less for your work.
Making money from remodeling investment properties.
Now you see how you can make a profit from one job.
Here is a process that you could consider to make serious money from your property investment remodelling on a full-time basis if you have sufficient capital behind you.
1. Go to contract on property #1 on a 60 day contract and get busy doing your remodelling plans.
2. Settle the property and take 3 months to do the renovation job.
3. When you have settled #1 property, go to contract on the #2 property for a 90 day settlement and get those remodelling plans drawn up.
4. Complete and sell #1 property then go to contract on property #3 on a 90 day contract.
You can see how rolling over the contracts and allowing the time in between contracts you can do 3-4 renovations a year with a satisfactory profit each time.
If rehabbing properties is your thing and you really enjoy it then you most probably will look at doing several a year and live off the income as well. Many a property investor has left their day job and gone into full-time property investing using this strategy.
Remember to always err on the side of caution, do thorough checks before buying, when writing up your materials checklists and at all times during the process. Ensure that your contractors are registered and insured for their work. Keep a buffer up your sleeve as not all renovations go as projected and you may need some extra money for unforeseen expenses to complete the job. Otherwise, enjoy the experience of remodeling an investment property.