How fast real estate can make you rich: The art and science of ‘rehab and retail’

A quick real estate deal helps you make money fast…and without a lot of headache. You can work from home, work part-time, and even start investing in real estate without a lot of start-up capital. It’s no wonder that fast-turning real estate is one of the fastest growing segments in the field of real estate investing.

Generally speaking, there are five ways you can benefit from quick turnaround real estate transaction strategies. In this article I want to talk about one of them. It’s a staple of real estate investing, and is commonly referred to as “rehab and retail.”

In fast real estate, when you buy a house for a low cost and sell it for a higher amount, it’s called a retail sale. You buy a house ‘wholesale’, perhaps make some modest repairs, and then sell it for a profit. What kind of profit are we taking in quick real estate? How much you earn will depend on whether you work full or part time and how many houses you sell. The average profit per sale is $20,000 to $35,000. In real estate investing… those are good numbers!

In this sense, real estate investing is similar to any business in which the price of an item is increased before it is offered for sale. And like any other business, it can fail.

In addition to being one of the most popular ways to profit from quick real estate, rehab and retail is also one of the most profitable. Yet despite the money that can be made this way, rehab and retail remains one of the most misunderstood techniques in real estate investing. Although the process sounds simple (buy, fix, sell), the reality of retail and rehab transactions is quite different. There are many costly issues that can arise with rehab and retail, especially during the repair process. For this reason, I recommend that novice investors choose another fast-turning real estate investment strategy.

Does that mean I’m saying your real estate investing business should never focus on rehab and retail? You are welcome. In fact, if you really enjoy home renovations and really have fun transforming a fixer-upper top into a “castle,” then it may be well suited for rehab and retail demands.

If that’s the direction you’d like to go, let me offer you these

Top 4 Tips for Getting It Right With Rehabilitation and Retail Transactions

Location, location, location – Limit your purchases to areas where qualified buyers will want to live. No matter how well you renovate, it’s going to be hard to sell a home in a high crime area. Why take unnecessary risks? Stick to better neighborhoods for your real estate investment.

Don’t Assume: Under no circumstances (that means NEVER) close on a property until you have appraised and appraised it by professionals (contractors, service personnel, etc.) so you know what repairs are required, how much those repairs will cost, and how much the home will be worth (repaired value) when the work is complete.

Expect the unexpected: Inevitably, home repairs will take longer and cost more than anticipated. It’s one of the biggest downsides to this fast-turnaround real estate strategy. Be sure to borrow enough to cover more than just the purchase price and estimated repair costs so that you have a ‘cash reserve’ to fall back on.

Trust no one – I know this sounds harsh, but contractors, on-site workers, and others involved in home renovations are notorious for poor business practices. Get recommendations from people you know, if possible. Supervise the work and keep a close eye on the progress and final result.