Rehabbing Houses For Maximum Value

Many people today make good money buying and selling houses. This process means you’re looking to purchase a property at the low end of its worth, renovate it and sell it at a much higher price. It’s a process that can be extremely lucrative. And once an investor flips their first house, the second opportunity gets even easier. But in a lot of situations, it is not as easy as just finding a home at diminished value and flipping¬†a house at a higher price. Keep reading for useful tips on how to get maximum value for homes that are need of improvements.

To get maximum value for a house that needs to be rehabbed several factors come into play. First, you must examine the present condition of the house, projected repairs and what will be the cost of the repairs. Usually, homes that are selling for way below market value have a lot of necessary repair work. You must determine if the expenses are worth it as to whether or not you can turn a profit.

The most important number to figure out when rehabbing houses for maximum value is the after repair cost. This amount is called ARV which stands for after repair value. If you are not sure how much the house will be worth once you’ve finished fixing it up, there is a good chance you will end up losing money. In some situations, this can be a lot of money if you do not accurately figure out the ARV ahead of time. This step is the most important part of rehabbing a house for maximum value since it helps reduce your risk. You must be able to buy the home at the right time and price to keep your risk to an acceptable level.

Investors like to use a formula for calculating what they should offer for a house to maximize their profit and also to minimize their loss in case things don’t go as planned. The maximum allowable offer on the house is 70% of the after repair value then subtracting the cost of repairs to get it in saleable condition.

The simple way to find what your repair costs are going to be is to have a contractor walk through the house.  Another way is to have a seasoned investor help you decide on whether or not the home is worth purchasing. Over time you get to learn what is and what is not worth buying, but if you are inexperienced at rehabbing houses, then it is always best to have a contractor help you make that determination.

If the house doesn’t need many repairs, you can go over the 70% ARV because you know that not much money is required to get the house into saleable condition. A seasoned investor can make that determination, but the 70% ARV is mostly used as a guide to stick by if you don’t want to lose money.

To determine the worth of a house once it’s fixed up, you need to evaluate the local housing market. Looking at comparable sales of similar property types in the area will give you an idea of the worth. But in some situations, there is not enough related information to go by, and that makes things a little more difficult. In that case, you must tread wisely when determining if the house is worth the asking price.

To assist in determining the maximum value through comparable sales, you need to look at the neighborhood. When comparing homes watch the age of the houses, the house size, immediate area, what houses have sold for recently, the number of bedrooms and bathrooms, home condition and additional factors such as pools, size of the property.