In my last post we discussed the benefits of rehabbing and the amount of money that can be made. You would think that every investor would jump in. But they don’t because of the 4 ugly fears that rise up and show off their vicious fangs. They are known as the “what if” beasts.
We can not allow these beasts to control our actions and dictate our destiny. So let’s slay these monsters and shatter any fears. It’s like the lesson I have been trying to teach my granddaughters about facing fear. Fear is your body’s natural way to say: “Caution”. It feels like “Stop”, but it is really just a caution warning. Before you proceed, assess the risk and make sure you are prepared with the best course of action. So let’s face these fears head-on right now.
Ugly Fear #1: What if I don’t have the money to do a rehab?
That’s perfect! You shouldn’t be using your own money anyway. When you use your own money, you limit the number of projects you can possible do. Instead, use Other People’s Money (OPM) for all your deals. In fact, when you have a good deal (and those are the only ones you should do), you have a multitude of traditional and creative sources of funding available to you. Even if your credit is bad you can still fund a good deal. My goal on all rehabs is to fund them 100% using OPM and that means purchase plus rehab plus all miscellaneous costs fully funded. Yes, that means you get a check at closing when you buy to get started on your project.
Ugly Fear #2: What if I have no experience and no construction background?
So what? You shouldn’t be doing the work yourself anyway – even if you are a talented contractor. This is a business and you need to hire out the work. Margie, my wife, and I completed our 1st rehab (and it was a big one) while we both had full time jobs AND so you know, both of us have a hard time driving a nail in straight. If you know what the house should look like when you’re done, and you are willing to ask questions, you can complete a rehab project well. Start simpler and work your way up. You may not want to do what Margie and I did which was baptism by fire. We just jumped into a huge rehab on our first try and learned a ton.
Ugly Fear #3: What if the contractors take advantage of me?
Some may try, but you’ll be smarter. Margie is the one that works with the contractors and in the beginning they just saw her as a woman who doesn’t know what she’s doing. She never let it bother her. She just kept calling out different contractors and getting different bids; asking questions; checking references. And the 2 most important points: She always has the jobs permitted so you have professional inspectors checking their work; and she never pays until she is satisfied with the work and it has passed inspections. Don’t put up with bad behavior. If the contractor isn’t doing what they are supposed to be doing – fire them and hire someone else. There are plenty of good contractors out there.
Ugly Fear #4: It may not sell quickly
It will if you have done your homework and give the buyers what they are looking for. I never worry about average days on the market. That’s immaterial to me. My house will sell first. Why? Because I know my buyers and what they want. I’ve checked out the market to make sure there are buyers buying. Then I check and see what they are buying and what they are paying. Next, I visit the homes on the market now to know what my competition is offering. And then it is simply a matter of delivering more quality for the right price.
The key in all of this is buying right. Do your homework up front. Know your costs going in and your targeted selling price, then create the home of your buyer’s dreams. The best advice I can give you is to keep your buyer in mind from the beginning and build a home for them. You won’t have any trouble selling.
I know that taking on a rehab sounds like it is scary, but if you follow the steps like you are supposed to, and don’t just rush into any rehab, but wait for the right one, you’ll not just make a lot of money, you’ll also enjoy the process.
Expect abundance,
Lou Castillo
