What is the most common mistake most investors make when remodeling their property?
Overspending on the rehab. This is a business where a lot of times we can buy the right property but we can ruin a really good deal in the rehab phase. This overspending commonly comes from two different sources: hiring a contractor who makes all the money on the deal or charges you too much for the renovation and over-remodeling. We want contractors to make money, but within a reasonable limit that doesn’t hinder your own gain. Wholesale contractors are: used to working with investors, more efficient, may do a higher volume of projects, and can get the same remodel done for a fraction of the cost while still making money. They can get stuff done on a budget and understand that we are not trying to build a new house, we are just trying to get this property into a condition that will pass the sale inspection and have enough tinsel to attract a new buyer. Alternatively, putting too much money into a property by over-remodeling can cause problems for investors as well, like adding high-end finishes where more basic ones are needed. Remember that we are not building a new home, we are renovating an existing home. There are many things that we do to renovate and re-sell for a profit, but not every home needs to be taken down to the studs. There are a lot of times where we can utilize existing wiring, existing plumbing, existing drain lines, and existing materials that can be put into finishes that sell. It needs to be a balance of not overspending or over-remodeling but putting the money in where you get paid for it: bathrooms and kitchens.
