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How Hard Money Lending Can Benefit You

Gone are the days when the thought of hard money lenders evoked images of shady lenders doing deals in dark alleys. Hard money lending has evolved into a reputable financing source for many people. There’s a lot of things that hard money lenders can do for you.

The Benefits of Hard Money Lending

Fast Process

Traditional lenders engage in a slow process, even if you have a good income and a good credit score. Hard money lenders take a different approach. Hard money lenders lend based on the collateral securing the loan. With this approach, they are not concerned about how you can pay the loan back. A hard money lender will just take the collateral and sell it in order to get repaid. That being said, your collateral’s value takes precedence over your financial position. Because hard money lenders are focused on collateral, the loan can be closed much more quickly than a traditional one. Hard money lenders do linger going through your loan application with a fine-tooth comb. They don’t spend time reviewing your income or verifying your current income. As a result, the loan process moves more quickly than a traditional loan. You can close a deal quickly with a hard money lender. And that’s very important in a hot market. You’ve got to be able to move fast.

Flexibility

With a hard money lender, you get some flexibility when compared to a traditional loan. Each deal is evaluated individually, instead of utilizing a standardized underwriting process. In addition, a hard money lender is much more willing to talk with you. It may be possible for you to tweak some things, such as repayment schedules. Instead of dealing with a bank with strict policies, the policies of a hard money lender are flexible.

Approval

Since the most important criteria for a hard money lender is collateral, approval is much more likely. A hard money lender will lend only as much as the property’s worth. If you need to borrow against a different property, that’s the value of that property will be what the hard money lender is interested in. Negative items on your credit report or previous foreclosures are much less important to a hard money lender than a traditional lender. Keep in mind that many hard money lenders maintain loan-to-value ratios (LTV). Their maximum LTV ratio may be from 50 percent to 70 percent. That’s a low ratio and hard money lenders know that they can sell the property quickly to get their money back. So, you’ll need some assets to qualify for a hard money loan. The bottom line is that your approval is much greater with a hard money lender.

Keep in mind that hard money loans make good sense for short term loans. That’s why so many fix-and-flip investors use hard money loans. Investors own the property just long enough to increase the value of the property. Then, they sell the property and repay the loan. This is often done within a year. If an investor plans for a longer time, he usually refinances for a better loan.

All around, the benefits of hard money lending are good when you know what you’re doing.

 

image of couple fixing and flipping a house

4 Things to Avoid When Fixing and Flipping a Property

Diving into the real estate investment world can be very exciting—and there’s certainly a lot of money to be made. If you don’t have much experience or haven’t done your research, though, your first fix-and-flip could end up being a disaster. By being aware of some of the most common mistakes investors make with fix-and-flip properties and how to avoid them, you can come out on top.

Paying Too Much for the Property

Start with knowing how to determine a fair asking price for the property in question. Many factors need to be taken into consideration when deciding how much to pay for an investment property, including:

  • the location
  • square footage
  • number of bedrooms/bathrooms
  • overall condition

And of course, you’ll also need to consider how much you’ll be able to realistically sell the property for once you’ve made the improvements. Make sure an investment property is going to be worth your time and will actually pay off in the long-run. Otherwise, you’re setting yourself up for failure right from the beginning.

Doing Too Much (Or Too Little)

Deciding on how to spend your renovation budget on a fix-and-flip property is a very precise science. You’ll need to have a solid understanding of which improvements and repairs will ultimately yield you the best return on your investment. From there, you can make smart choices moving forward.

For example, did you know that adding a wooden deck or patio on an investment property can bring in as much as a 90% return on your investment? Other projects to consider that can really pay off include bathroom/kitchen upgrades and landscaping improvements.

Choosing the Wrong Professionals

Even if you consider yourself a DIY expert, you won’t want to take on an entire fix-and-flip yourself. Instead, your time and resources will be better spent making big-picture decisions and overseeing a team of experienced and licensed professionals.

The contractors you choose to trust with your property’s repairs and improvements can have a huge impact on the results—and on your bottom line. Take the time to screen and interview potential contractors, and always make sure they’re properly licensed, bonded, and insured.

Making Polarizing Design Choices

Ultimately, your goal with an investment property should be to appeal to as large of an audience of potential buyers as possible. This means that you’ll want to avoid making polarizing design choices and keep things neutral instead. As much as you might love the idea of installing a bright and bold backsplash tile in the kitchen, you’ll probably get better feedback from potential buyers if you stick with something neutral and in-demand, like a white subway tile backsplash.

As you can see, there’s a lot to keep in mind when it comes to taking on a fix-and-flip property. By starting with the right purchase price and choosing a team of reputable contractors to carry out your projects, you’ll be well on your way to making some money with your first real estate investment!

Image of Commercial Real Estate Buildings in Arizona

As Arizona Begins To Re-Open, What Should We Expect From the Commercial Real Estate Industry?

The ongoing coronavirus pandemic has fundamentally changed the world as we know it. As countries around the planet began to shut down, states within the U.S.A.. followed suit. While each state followed its own set of guidelines, the country as a whole experienced a cumulative economic downturn. Now, months later, the state of Arizona is beginning to re-open as life returns to some semblance of normalcy. Unfortunately, life will be anything but normal for the commercial real estate market in the weeks, months, and potentially even years following COVID-19.

Understanding the Impact of COVID-19

While much has been made regarding the discussion of COVID-19s true impact on the country, it is hard to ignore the economic fallout that has taken hold in Arizona’s commercial real estate market. According to a vacancy report detailing post-COVID office vacancies, Arizona’s business sector is sporting Great Recession-levels of vacancy rates within traditional office buildings. A report compiled by the team at Costar projected that vacancy rates in commercial offices will remain between 11% and 15%. Seeing these numbers and understanding their impact are two different things. While only a sliver of the picture, this vacancy number gives us plenty to digest.

Let us briefly chart a few primary ways that the commercial real estate industry in Arizona will shift for the foreseeable future. As the state of Arizona continues to re-open, these expectations should be held for the commercial real estate industry:

  1. Space Requirement Changes – Living in a post-COVID world means acclimating to the new normal. Social distancing, sanitation, and large open spaces will dominate commercial property in the coming months and years. As OSHA and HR reps around the state adjust to these new regulations, expect businesses to need larger spaces for the same amount of work.
  2. Equalizing Rental Rates – As individuals struggle to make ends meet, there is an expectation that rental rates will reach an equalization factor. Landlords who are not beholden to debt or lenders that are offering amenable rates will do what is possible to keep their buildings fully staffed. As landlords compete to retain the best tenants, there is an expectation that flexibility in lending and renting can be met.
  3. Changing Operational Expectations – Industries that rely on call centers will also experience rather large changes in the way that they perform in the post-COVID world. Call centers will be expected to split shifts to reduce the footprint of their employees. Buildings will be reorganized and adjusted for CDC and OSHA regulations which could include the installation of filter systems, sneeze shields, and other sanitary safety measures.

While there is no telling exactly where Arizona will be on the other side of the COVID-19 re-opening, it does appear that the state is primed for a healthy launch. Arizona sports a warm and dry heat thanks to its geographical location. With plenty of room for potential land development and a healthy infrastructure for commercial construction, Arizona is in a primed position to succeed.

Home made of investment money

5 Reasons to Invest in Real Estate instead of Stocks

A good portfolio should be diversified. There’s stocks, bonds… but also real estate. In fact, most investors would be better off investing in real estate rather than other types of investment — for a number of reasons. If the volatility of the market has you hesitating to invest, consider a few of the reasons why real estate might be better.

1. Real estate is a more versatile investment.

You can make money through real estate in a few ways. First, there’s equity: It accrues value over time. Second, you can rent it out. Third, if you don’t want to rent, you can always just flip. Real estate gives you a lot of different opportunities to make money, so even if the market is changing, you’ll still find a way to profit.

2. Real estate fluctuates far less.

Real estate always goes up in value over time, compared to the stock market which frequently goes up and down. If you want an investment that’s never going to give you a heart attack, you want real estate. Even when real estate boomed-and-busted, it was over a comparatively short period of time, and it did rebound.

3. Real estate is something everyone knows a little about.

Most people have bought or sold a home whereas most people have not bought and sold a company. The fundamentals of a business can be very confusing, but most people know a little about what real estate would be considered valuable.

4. Real estate is both physical and finite.

Real estate is valuable for the same reason gold is: There’s a limited amount of it. There will always be a finite amount of real estate, which is why it’s always going to be more valuable than other types of investment.

5. Real estate gives you control over your investment.

You have direct control over real estate. If you want to make it into a business, you can. Your own effort in flipping a house or renting matters. But if you’re just investing in stocks and bonds, there’s very little you can do to influence the ultimate outcome of the investment. You’re at the mercy of the market forces.

That’s not to say you shouldn’t be invested in stocks and bonds, too. But in times of high volatility, it can be better to purchase something a little more secure. Real estate has long been a good investment during tumultuous times for all these reasons.

Differences in Arizona Fix and Flip Loans

Fixing up and flipping a house can be a lucrative investment, but first you need the investment. In the state of Arizona, many savvy investors use what are known as “fix and flip” loans to purchase and then quickly renovate a property to get ready for sale.

Keep reading to learn more about fix and flip loans and to determine what type may be the right choice for you and your project.

Why a ‘Fix and Flip’ Loan?

You may be wondering why you should consider a fix and flip loan as opposed to a regular bank loan. Well, fix and flip loans actually come with many advantages over traditional loans.

To start, fix and flip loans are intended for shorter designated periods of time and can even be approved faster than traditional bank loans. Experienced fix and flip lenders also do not require as much background investigation or have as stringent qualification standards as traditional banks, giving people a greater likelihood of getting approved.

Types of Fix and Flip Loans

There are three main types of fix and flip loans in Arizona. These include the following:

  • Hard Money Loan – this is highly convenient type of loan that is intended for people of all skill and experience levels (when it comes to flipping houses). Funds are approved (within 24 hours) and received quickly, allowing projects to get underway fast. While these types of loans do often come with higher interest rates, they usually include shorter terms that many people use to make a profit off of their house quickly.
  • Home Equity Line of Credit loan – A Home Equity Line of Credit or “HELOC” loan works kind of like a credit card. The investor is given a designated line of credit that is based on their existing property’s value. While the project is underway, interest is only charged on the amount borrowed during the credit line period. Now, it is important to note that this type of loan usually comes with repayment terms that may not be right for everyone: interest-only payment for the initial 5-10 years, followed by both interest and principal payment. Furthermore, while interest rates are lower, approval can take up to a month or longer.
  • Bridge Loan – This is a temporary short loan that is used only during the gap between real estate transactions. In other words, you can purchase a house you intend to flip without having to sell another property first. Interest rates are usually mid-range, but it’s worth pointing out that this type of loan often results in the investor having to pay two mortgages at once. And while the loan period is shorter, approval time may still take a bit longer than a hard money loan.

Which Loan is Right for Me?

The right kind of fix and flip loan for you will depend on a few different factors, namely your personal experience in flipping houses, the amount of time you have and the type of property. For example, those who need to close extremely quickly may benefit from a bridge loan, while those who need longer terms may look to a HELOC loan.

Nevertheless, hard money loans will be the right way to go for many due to this type of loan’s lenient requirements and fast approval / fund delivery. If you already have your project planned out and need financial assistance fast, this will likely be the best choice for you.

Are you ready to learn more about how a fix and flip loan can get your project underway? Contact the experts at Barrett Financial Group today!

How to Maximize ROI On Your Arizona Hard Money Loan

What’s the point of a fix and flip house project if you’re not going to get back everything you invested in it and more? After all, flipping a house the right involves not just the initial hard money loan financial investment but your own time, physical effort and even various other expenditures along the way. Fortunately, there are various measures you can take to make sure that none of this ends up being a waste of time.

Here are some fairly simple tips you can follow during the selling process to make sure that you are maximizing your return on investment:

Seize the Advantages a Hard Money Loan Has to Offer

By utilizing a hard money loan in lieu of a traditional mortgage or other bank investment, you actually have multiple advantages that other financial avenues may not offer. For example, hard money loans offer both conveniently fast approvals and flexible terms. This means you can get started on your fix and flip project much faster and can use the time that you need to make sure the project gets done right. And because the collateral for the loan is usually the property itself, you have the convenience of not having to make constant payments to a bank or having to come up with other assets.

Take Some Great Photos or Hire a Professional Photographer

Think about how you’re going to draw in prospective buyers. These days, people often browse through dozens– if not hundreds– of real estate listings online before they finally narrow down a list of houses they would like to see in person. It is therefore important to not just write up a great listing that can be posted on various high-traffic real estate sites, but also to post some appealing photos.

If you have a high quality camera and have an eye for great lighting and space, you may be able to take professional-looking photos yourself. If not, you may want to consider hiring a professional photographer to come do the job for you. After all, the photos are arguably the most important part of any real estate listing, and a great one can be the difference between prospective buyers clicking to see more and scrolling on past.

Stage the House for Showings

Selling the house is the very last stage of a fix and flip project. So why stop putting in effort now? Stage the house to make it look like a home, not just a project. You don’t need to go filling it up with furniture and hanging pictures, but putting in at least some home items will help. After all, people are better able to envision themselves living in a place if they see some furnishings already in place.

To keep costs low, consider picking up some nice-but-cheap furniture from Goodwill (always make sure it is clean before putting it inside the house). If you won’t miss it during the showing process, you can also borrow some furniture from your own home.

That said, you might also want to consider enlisting the help of a professional staging company if you really want to go the extra mile. Often used by realtors, these companies require minimal effort on your part and will stage the house for you to make it look like a real attractive home. When a house is staged right, you are more likely to get a higher selling price.

Consider Hiring a Professional Real Estate Agent

Let’s be real– you’ve already put in a lot of effort on your own by this point, and if you’re like many people you probably want to see your fix and flip project right on through to the very end. While it is certainly possible to sell the property all on your own, the truth is that you are far more likely to attract buyers (more specifically, high-spending buyers) if you enlist the help of a professional real estate agent. They can get your listing on high-traffic websites more easily and can use their industry connections to get the word out to local realtors working directing with buyers.

While you will have to pay a fee to a realtor, the truth is that using one is the best way to bring in as much revenue as possible.

 

Arizona Fix and Flip Tips

Fixing up and flipping a house is a great opportunity to make a substantial profit, but only when it’s done right. A lot of people get into this business thinking that a few coats of paint and maybe some new fixtures is all it takes to flip a house for a fast profit, only to find themselves either stuck with a property they can’t sell or construction and repairs they can’t finish. And in booming real estate markets like Phoenix AZ, it can be a simple matter of ignoring the local weather conditions the property is in and not making repairs accordingly.

If you have no prior experience in fixing up houses, you may want to consult with an experienced contractor. That said, it is possible to take things into your own hands if you’re willing to put in the time and effort required. In Phoenix (and other parts of Arizona), you’ll also need to take into account the hot and arid climate before making any repairs or modifications.

Here are some tips you can follow to make sure your fix and flip job is done right:

Install Drought-Friendly Appliances

As anyone who’s lived in Arizona for a while can tell you that droughts are common. You’re probably already planning to put in some new appliances to up the property value, so why not boost your house’s appeal more by installing some water-saving appliances?

The good news is that there are more water-saving appliances available these days than ever before. The main ones you’ll likely want to look into are low-flow faucets and shower heads, as well as double flush toilets (toilets with different flushing power available).

Consider Alternatives to Water-dependent Plants and Lawns

We all want great curbside appeal, and the front yard is a huge part of that. In some cases, it can be more of a selling point than the house itself. But here in the Phoenix region, it just doesn’t make sense to invest in a lush green lawn with grasses that require heavy watering, nor is it worthwhile to have a lot of other foliage that requires a lot of water to survive. So, stick to plants that thrive in desert climates like cacti, California lilacs, yucca plants, etc. Some examples of drought-resistant glasses include Bermuda grass, Buffalo grass and Bahia grass, but there are actually a surprising amount of low-water varieties out there.

You may also want to user stones as decoration or even tasteful, contemporary ornaments for extra pops of color. If you really want to boost the home’s value, look into building in tiered plant or rock beds (adding dimension can add just as much value or even more than a traditional open lawn).

Make Ventilation and Interior Shade a Priority

Especially in hot, desert regions like Arizona, the home should serve as an oasis against the bracing heat and dry air. Buyers will flock to your house if air flows freely through it and they can escape the dangerous temperatures outside.

With these things in mind, you may want to install new windows or a sliding door that allow for plenty of air flow. Take a look at the existing ventilation system too, as it may be due for some updates.

Putting in some nice thick doors will also help keep the house insulated and cool. They will also instantly add much-desired value to the property, especially since this is an area where a lot of people tend to skimp on.

To make sure the house is kept as comfortably cool as possible, make sure that the walls are properly insulated as well. A lot of buyers will also appreciate it if the windows already come with some good quality shades or blinds that block out bright sun and heat.

Make Sure You Have the Finances You Need to Complete Your Project

One of the biggest things you can do to ensure a successful fix and flip project is to secure the financing you need ahead of time. Hard Money Lenders Arizona makes it easy, with fast approval rates and a simple application.

Have more questions about how you can make your fix and flip house ideal for the Phoenix market? Or just want to get started already with your investment? Contact us at Hard Money Lenders Arizona today. We’re here to help make your house flipping dreams become a reality!

All You Need To Know About Arizona Construction Loans

Whether you’ve recently purchased land you want to build on or are currently considering it, you’ll most likely be in need of a construction loan. Here’s everything you need to know about getting a construction loan in Arizona so you can get quickly on your way to building your dream home!

What is a Construction Loan?

A construction loan is a specific sum of money that you will use to fund your building project. Like most other types of loans, a construction loan is paid back gradually in installments, according to pre-set rules laid down by the lender. Construction loans are often paid out by the lender in installments as well, usually as the project goes along and hits specified milestones.

Why You Shouldn’t Just Get a Regular Loan

You may be wondering why you shouldn’t just apply for a regular (lump sum) money loan that can be used for general purposes in order to fund your construction project. However, there are some great reasons to apply for a specific Construction Loan as opposed to a regular loan.

Because the loan is focused entirely around a construction project, the funds are released in stages as the project moves along. This helps you keep on track and stay within your budget, and it also means you will actively be using the money instead of getting approved for it and then just letting it sit (which happens all too often with regular loans). Furthermore, construction loans often come with more flexible terms than regular loans, allowing you to pay it back after the project is completed rather than expecting payments before you are done.

Consider a Hard Money Loan Instead of a Bank Loan

When it comes to home construction, a hard money loan is often the way to go instead of going through a bank. A hard money lender has less stringent rules on how the money can be used and when it needs to be paid off, giving you more time and flexibility with your project. While a hard money loan can sometimes cost you more in the long run than a bank loan, you are also more likely to get approved for one. This is because hard money lenders look more at the project’s potential and its likelihood of being completed rather than at personal credit scores and financial history.

Bank construction loans meanwhile have more stringent standards and can be difficult to get approved without either making significant changes to the construction plans or having a really solid credit and financial history. These types of loans are often “one size fits all”, and if you do not fit into their specific box of requirements, you will not get approved (and even if you do, the pay-back requirements can be very strict). Hard money construction loans are meanwhile more lenient, and they focus on the project as a whole rather than the specific person.

How to Apply for a Construction Loan

Banks require a ton of paperwork and documentation of financial history prior to approving you for a loan, but hard money lenders usually only require their application to be completed and do not need as much paperwork. That said, you will still need to outline your project and be able to show how you plan to achieve your construction goals. Bank approval can take days if not weeks, but approval from a hard money lender can come within 24 hours. Following approval, your property and project will still need to be appraised to ensure you are getting the money you need and that everything is in order.

Construction Loans Can Be Used for Land As Well

It’s worth noting that construction loans can also be used for purchasing land to build on (although they may sometimes have an add-on termed “land loan”). This can be very helpful if you are still in the initial stages of your project but have a clear idea of what you want to achieve. Once approved for your loan, you can buy the property of your dreams and start making your construction goals come to life!

Have more questions? Talk with a lender today about your options!

Top 10 Tips to Sell Faster in Phoenix

It’s only natural to want to sell a property as quickly as possible. Whether you’re flipping a house or are selling the place you’ve lived in for years, finding and securing a buyer quickly allows you to move on faster and not have to wait for a big payoff.

Visit any bookstore or do a quick Google search, and there’s tons of literature on the art of selling property. However, a lot of it is full of vague information and tedious steps that don’t help you sell quickly. While you don’t want to cut out necessary steps, there are measures you can take to sell quickly and smoothly.

Follow these top 10 tips to selling faster in Phoenix, and you’ll be signing over your property in no time!

1. Make Sure All Maintenance & Improvements Are Complete

A lot of people make the grave mistake of listing the property prior to all renovations, maintenance projects and landscaping being completed. While it can seem like a time saver to list the property when it’s almost completed, doing so often boils down to some wishful thinking and a misunderstanding of how long these projects can actually take. Showing the property before it’s finished (and this also means being thoroughly cleaned inside and out) can also lead to lower bids being offered.

2. Take Quality Photos

Having great photos of your property is among one of the most important things when it comes to selling, because these are what actually draw potential buyers to the property. While you don’t necessarily need to hire a professional for this, all of the photos should be high resolution and well lit. Make sure there are no mop buckets or cleaning products left around, and if there is furniture, it should be clean and well staged.

3. Make Sure the Price is Right

It’s a good idea to discuss what the price should be with an experienced real estate agent, or if you’re selling on your own (not necessarily the fastest way to sell, but still doable), do your research on what similar properties in the area have sold for. You don’t want to be overpriced, but you don’t want to undersell either. Buyers will be quickly attracted to a property that is reasonably priced and fits what they expect to pay in the area.

4. List on MLS

Your local Multiple Listing Service or MLS is your best bet to sell the property quickly. This will give the property more exposure, and it can easily be done through a broker or real estate agent who works in the area.

5. Read the Market

Once your property listing is up and running, it is important to pay attention to how it performs early on. If you’re not getting as much interest as you’d like, it could be because of something you can easily fix (like getting better photos or supplying more information). Talk to your agent about how things are going on the buying side of things, and see if there are any comments coming through that you can use to your advantage.

6. Be Smart About Lowering the Price

Going along with the above, sometimes one of the adjustments you’ll have to make is lowering the price. However, a dramatic drop in price can look bad, and too many price reductions can also turn buyers away. If you’re going to lower the price, it should only be done to meet market standards and should be done as sparingly as possible. You can discuss what the best strategy is here with your real estate agent.

7. Only Accept Offers with Lender Approval

When you do start getting offers, you should only look at ones that come with an approval letter from the buyer’s lender. The last thing you want to do is accept a bid quickly only to find that the buyer doesn’t actually have the funds to back it up, as this can end up costing you time and money.

8. Go with the Best Offer

Contrary to popular belief, the best offer is not necessarily the one that offers the most money. Instead, it is the one with a responsible buyer who will close on time and is financially qualified. They already have lender approval, and they are prepared with all the documentation they need. Oftentimes, the first offer you receive is the best one, but it is still important to review these qualities in each offer you are considering.

9. Be Prepared for the Inspection

Most buyers won’t close without an inspection being completed, and in many cases they will have specific details they want looked at (like the foundation, water heater, electric outlets, etc.) to make sure the property is up to code and safe as well as valuable. Be prepared for this ahead of time so you aren’t caught off guard.

10. Complete the Appraisal

The final step is letting your property be appraised. This process can go faster if you have gotten a previous appraisal report that you can provide a copy of, as it will help the current appraiser do their job more efficiently (and better understand your pricing).

Tips For Estimating Arizona Rehab Costs

Flipping houses is an exciting and lucrative business – if you’re good at getting the right estimates of rehab costs. If you want to be a pro, you need a system. This comes with experience and after some time, it will be easy for you to walk through your fix and flip project and quickly and precisely asses the rehab costs, including labor and materials. Keep in mind, however, that material prices fluctuate over seasons. There are so many variable, steps, choices, and work that goes into a rehab project that you’ll want to make sure you do it right – right from the beginning.

Ready to learn the tips and tricks of the trade that will turn you into a pro? Read on to find out.

Material Costs

After your walk through, make a list of the materials you need and visit your local supply stores to compare prices on paint, tile, flooring, lumber, windows, doors, and more. From here, you can contact local lumber yards or other stores to find competitive prices. Expect to shop at a few different stores. You’ll probably find yourself buying paint from one store and lumber from another. Keep in mind that there’s a difference between working with the big box stores and specialty stores. For one thing, the owners of specialty stores are “specialists” and have the expertise to help you pick the right materials. Not everyone working at big box stores fits into this category.

To save money, talk with a manager about membership benefits and pricing. The more work you do, the more chance you’ll have of negotiating a better price for your materials.

Time is Money

Have you ever replaced a roof or renovated a full size bath? Do you know how long these projects take? If you’ve answered “no” to these questions, take a step back and do some research before you tackle a rehab project. For example, installing a new roof should only take a few days, but there are contractors out there who will tell new investors that it will take two to three weeks. In fact, many projects can be done quickly on a rehab flip. That’s why it’s important to know the exact time it should take for a project – you are paying labor costs after all! – before hiring a contractor.

Base Estimates on Function and Category

Typically, you would think to categorize your expense by project. You’d add up everything needed for the kitchen remodel, the master bath renovation, etc… But this method isn’t the best way to go about a rehab. Instead, list by function and category, like plumbing, flooring, electrical, and windows. Put it into this perspective: you don’t hire a kitchen contractor. You hire a plumber. You’ll hire a carpenter to do your trim work. An electrician to do your electric work.

Once you draw up a Scope of Work using this method, you’ll easily see the flow of the project and what order it needs to be done in. This will help you know whether your contractors are on schedule and what materials to have on hand and ready to go.

Don’t Forget the Finishes

After knocking down walls, ripping out countertops and putting everything back together again, you’re done. But hold on, don’t forget about trim and finishes. All that work you put into your rehab project still needs some added touches. In fact, these extras add value to your property, make it more desirable to buyers, and overall improve the aesthetics of the property. This means that when you’re creating a Scope of Work sheet, you’ll want to include estimates for things like doorknobs, door stops, outlet covers, baseboards, and miniblinds. This is a somewhat expensive part of the rehab process, so it’s important to have it properly estimated for materials and labor in the beginning.

If you’re new to flipping properties, it’s always better to start with a smaller project rather than a gut job. This way, you can ease into learning about calculating the costs of a rehab project and scheduling the contractors you’ll need to help get the job done. Take heart, however, by knowing that the learning curve for flipping properties is steep. It won’t take you long to figure out how to work this system and turn every rehab flip into a profit. Finally, prepare for the unexpected. Every job will hold a surprise for you so be sure to have a contingency budget tucked away.