5 Tips For A Low Headache Real Estate Project
Anyone who has ever spent time rehabbing a house or building will tell you how much of a nightmare it can be. I am certainly one of these people. I have done renovations with my own two hands and hired out the work to be done for me, with each of these I have had good projects and horrible projects. Here is what these various experiences have taught me.
1. Know your numbers!
Real estate is a business with a certain level of risk and variables. Learn to understand these so you do not get yourself in trouble. Numbers to be aware of are rehab costs (the costs of the actual work), financing costs (costs of acquiring and paying on loans), and of course exit strategy numbers(how much can you sell or rent the property for on the back end?) Understanding these numbers and how they interact with your project will help you set up the correct safety measures to get in and out successfully
2. Have good Contractors
Have good Contractors (even if you are DIYing it). No one is perfect at anything. However, being able to communicate appropriately with someone is paramount to any relationship. Working with both honest and skilled people will take a ton of time effort and costs off your back (even if they may seem more expensive upfront). If a contractor can mess up, own up to it and fix it, take constructive criticism, give good tips on getting through a project, and especially be honest. Then you are in good hands. Building the right relationships in this business is important. When starting, I had contractors I couldn’t trust and had to be there every moment of the day to make sure they weren’t doing shortcuts (they still did as soon as I turned my back). Now that I have built good trusting relationships with a good handful of people, I barely have to show up at all. If you are DIYing it is helpful if you know yourself and know your limits. I know when I do the physical labor there has to be either some form of time crunch or I have to have someone I’ve hired day by day so that I get things done!
3. Keep it simple!
Keep it simple! Yes, every home remodel reality show has each house project with designers and high-end finishes. In some cases that is necessary, but most of the time especially at the beginning you aren’t going to be working on multimillion-dollar mansions. You will probably be working in middle-class or lower homes. So keep it simple, fancy can get out of hand quickly. Make your remodel projects appropriate for the area. I tend to use light gray wall paint, white cabinets, black countertops, and LVP flooring(I think it looks great! See the picture below). Keep the same design as much as possible through your flips. This brings in a lot of efficiencies and removes friction in decision-making for each project.
4. Buy Cosmetic Rehabs!
Buy Cosmetic Rehabs! Especially at the beginning of your career buy simple flips. Homes from the 1980s or later tend to offer a better overall experience as the residential building code was more developed by this point. There was no more cast-iron plumbing, framing tends to be 16 inches on center, all copper wiring was installed, etc. This takes out hassle and headache. I dealt with some terrible unexpected expenses when I found out my late 70s cast iron sewer system was completely rotted out(this wasn’t expected because the home was built the last year of cast iron so it should be safe. right? Wrong. That mistake cost me $15,000).
5. Don’t get Caught up in Maximizing a deal
Don’t get Caught up in Maximizing a deal. This was a lesson I started learning before I ever got into real estate. I worked for a contractor as a salesperson, we dealt with a lot of insurance claims, and the emphasis at that company was to maximize the profitability of each deal rather than quickly getting in and out. This caused more headaches and loss than worthwhile profit. The same can be said in your projects, there are many shiny objects as real estate has so many options to pursue. Make a plan, have a backup exit strategy then stick to it. Sometimes, you simply cannot afford the “best use” it always depends on your personal financial and life situations. If you are say working on building up your liquidity to operate your business, it is not the time to take a flip and turn it into an Airbnb just because it would make a great one. Doing multiple things in a business will spread you too thin. Focus on your goals whatever they are. You can optimize for the best opportunities later.
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