R.O.C. 217734

Home   Contact Us   Products & Services   Investment Properties   Fixer Upper's   Buyers   Builder Info

Fixer Uppers Rehab's Knowing how to look for rental rehab property, what to look for and how to buy it can be a daunting task for a new landlord. Following these basic tips and strategies will help you on your way to becoming the landlord you have always wanted to be. Finding the Right Property. Finding good, rehab potential property takes a little work. It’s not as easy as opening the newspaper and looking at the classified ads, or buying a "get rich with real estate" scheme. Diligence, hard work and knowing the right way to look are what will make you successful. In order to be successful you must change the way you think, which is why it make perfect sense to use HASSAN HOMES as your vehicle to reach your investment goals. Before telling you how to find properties, I want to dispel a couple of myths that most people believe.  Myth #1 "Location, location, location" I hear it over and over. Many people believe the location of a rental property will support its success as a money maker. This is just not true. Buying rehab property in a poor neighborhood in town will cost you a lot less than in a posh neighborhood, and it will bring in exactly the same amount of rent if you rent to tenants with subsidized rents (welfare, Section 8, government assistance, etc.).  Myth #2 "A 2 bedroom will be quicker and cheaper to rehab" Again, not true. The cost of rehabbing a 2 bedroom will be about the same as a 3 or 4 bedroom house. The increased rent a 3 or 4 bedroom bring make a 2 bedroom look sheepish in comparison. Stick with 3 and 4 bedroom rehabs. Unless the 2 bedroom is a steal and a turnkey (ready to rent today), forget the idea. Now that location and size are established, it’s time to start looking for your property! Great rehab potential houses are never listed in the classified ads. Even if they were, they would be gone (if they are that great of a deal) before you even pick up the phone. You have to look for them. Go for a drive through a neighborhood that has boarded up houses. Those houses are perfect for rehab! To begin your quest, follow the simple instructions below:Identify a board up and get out of your car to look. Never mind broken glass, windows, garbage and the need for a new roof. They all need those things. What you are looking for is a solid house frame. The rest can be dealt with. Take a picture of the house. Note the address in a notebook. Make little comments and notes to help you remember which house this is. Don’t worry about abatement signs or similar. All that means is that the house is not up to par -- but you already know that. Note any phone numbers or names on sticker that might be on the door.This can save you a lot of time later! Continue looking, writing down addresses, taking pictures and making comments until you have several potential houses. Finding the Owner Locating the owner of a property sounds a little easier than it can be sometimes. Many times, owners of boarded up properties don’t want to be found. Don’t be surprised if only two owners out of your twenty properties contact you. Remember, diligence is the key to successful real estate ownership. Don’t give up! Here are the methods I have used to locate absent property owners. I have had fairly good success using these methods. The first thing you need to do is find out who pays the property taxes on the house. It’s easy. Go to your county assessors' office.The records they have on file are public knowledge. Ask the receptionist how to look up houses. Go through and find the names and addresses of all the houses and owners on your list. Many times, there will be a picture of the house. My assessors' office allows me to copy the records, which make it easier than jotting all the information down. If you are not able to do that though, be sure to write the owner’s name and address, assessed value of the house and any other information that you think you may need when contacting the owner. Once you have a name, look in your local phone book. Many owners live in the same town as the property you are interested in. Get a phone number if possible. If you can’t find the owner locally, look in the Internet white pages. I have found many owners on the Internet. Write a standard letter saying you are interested in buying the property at such and such address. If the address you have for the owner is different than the property address you are interested in, chances are you will make contact. If the address of the owner is the same as the property address, chances are you will get your letter returned. What’s the Right Price? Everyone has their price. The key to good property investment is knowing what to pay and what is not practical. I use a simple method to determine what I am willing to pay for a rehab property. It has served me well. Again, there are a couple of myths that need to be addressed before you decide how much you are willing to pay for a property. Myth #1 "I can pay it off in 20 years" I don’t know about you, but I am not willing to wait twenty years to see a return on my investment. That’s just too darn long. When I started rehabbing, I decided I wanted to see a return in 2 years. I now stretch that to 3 years but that is as long as I am willing to wait. Consider carefully the length of time you are really willing to wait to see a return on your investment. Myth #2 "If I can clear a couple hundred a month" This strategy almost never works. Things come up. Besides, why would you be willing to take scraps of what’s left over after you pay costs, if you can take it all after just two or three years? Here is the formula I use to determine what I am willing to pay for a rehab property. 1. Rehab properties almost always need the same things. They need new roofs, new furnace, all cosmetics, new electrical and a lot of trash removal. I do most the work myself, which saves a lot of money. For example, if the property needs a new roof I will figure an estimate of what my supplies will cost me. I also figure the furnace, electrical, etc. Don’t get too elaborate here, but figure general cost in your area. I over estimate on cosmetics to make up for any adjustments that may be necessary. Roof -- $3,000 Furnace -- $3,500 Electrical -- $3500 (if I hire an electrician) Cosmetic -- $10,000 The cost of this rehab will be about $20,000. 2. Now, research what fair market rents are in your area. I can get $850.00 a month for a 4 bedroom house. I am willing to go 3 years before I see a return on my money. $850 X 36 months = $30,600 3. $30,600 – $20,000 = $10,600. I would be willing to pay $10,600 for this property. Financial.... The key about computing these costs is this: Once the property is bought, don’t ever figure the costs again! Why? If you are being diligent and prudent with how you are spending your money, there would be no benefit to recalculating costs. I can tell you my calculations came up a little short a couple of times, and I was ahead a few times. It doesn’t matter. Now you have a great investment that will bring you years of income! Financing.... There are a few ways you can finance your property. Naturally cash would be the best. Obviously, this is not always possible. Loans. Banks love a good potential and they know real estate is a good investment. When borrowing though be sure to stretch the payments out as long as you can, for as little per month as possible. Pay the minimum payment until you start drawing rent. When the property is rented you should put all of the rent toward the loan and the rehab costs. If possible, try to get the rehab money in with the loan. If not, use a credit card and count on using part of the rent you get to apply on the loan, and the other part to pay the card. If you do it right, all the money that you receive will pay on your property. You will soon have it paid and all the rent will be cash flow in your pocket. Credit cards. I chose a low interest credit card with a generous cash advance feature. I bought and rehabbed my first house with a credit card! There are many ways to finance rehab properties. It is also to your advantage to check your city rehab grants. I was lucky and received a grant for my first house of $15,000. The condition was that I rent to low income families (which I had planned to do anyway). It would be worth investigating. Do It Yourself vs Hiring an Attorney If you don’t know real estate it can only be to your benefit to spend the little money it costs and hire a real estate attorney. The worst possible scenario would be that you think you bought a great rehab property only to find out the person who sold it to you has multiple liens or worse, doesn’t own the property. Finding and buying rehab property can be a lot of work, but definitely worth it in the long run. Knowing how to find the right property and financing it can help you on your way to a lucrative financial future! "It's the equal-opportunity wealth builder".