The 8 Biggest Rehabbing Mistakes - Part 2 by:Sal Vannutini
In the second part of The 8 Biggest Rehabbing mistakes we look at three more areas that can swallow up your profits in no time
.
BIG MISTAKE #6: YOU PAY TOO MUCH WHEN YOU BUY
You make your profit when you buy. Pure and simple! I will always tell my coaching clients at my workshops that this is the most valuable advice that they will ever receive from me. The added value from the renovation is the icing on the cake.
Always research your market well and ensure that the potential selling price is achievable when all costs and profit margins are taken into consideration. Never, ever let yourself be ruled by your emotions when buying. You must always allow for buying, selling and closing costs. Where possible, your purchase price must be sufficiently below market value to at least allow for these costs. Even better, the price should be low enough to allow for closing costs plus rehabbing costs.
The following formula will allow you to assess the real purchase cost of a particular home that you may have in mind.
Starting with the final selling price, work backwards and deduct selling costs, profit margin, renovation costs and buying costs. This final figure is how much you should be prepared to pay.
BIG MISTAKE #7: FAILURE TO UNDERSTAND YOUR TARGET MARKET
How often have you walked into a home and been totally horrified by the dcor? Yet this is another common mistake made by renovators. They let their emotions get in the way and decide what is good for them is good for everyone else.
There are two principles that I apply when renovating. The first is the K.I.S.S. theory: Keep It Simple Stupid!
The second is to focus on the 'WOW' factor. It is no coincidence that a home sells quicker and for a higher price when it possesses strong buyer appeal. You're here to make money, not win a home decorating award. Give the market what it wants, not what you think it wants!
BIG MISTAKE #8: SPENDING TOO MUCH ON THE REHAB
The great temptation of renovating is to do too much. Whilst the 'WOW' factor is critical, you MUST keep your emotions out of the equation and strictly adhere to your budget.
Nothing goes exactly to plan when renovating, so don't panic if you exceed your budget by small amounts. Allow for a buffer to cover any surprises (usually 10 to 15 per cent). I certainly fell into the 'do too much' trap during my early projects.
Always have your costs estimated accurately prior to purchasing a property. Later on I will talk about contract of sale conditions. One such condition is to purchase subject to having a builder inspect the property. This will enable you to discover any unforeseen surprises. I encourage you to renegotiate the price should the inspection uncover any major defects - or better still, walk away.
My budget parameters are 10 per cent of the purchase price for houses. This can be stretched to 15 per cent if it means that a great profit can be made. These are personal preferences that have worked for me. They are in no way set in concrete and readers should exercise their own judgment. There is no right or wrong way in this business.
The percentages that I allow are in keeping with my primary objective of obtaining the biggest bang for your buck in the shortest possible time and with the minimum amount of money possible.
Conclusion: Understand that things can and do go wrong in this business. Now that you are aware of the pitfalls, you will be better prepared from the outset. All it takes is a little planning and there is no reason why you can't join the thousands of Americans who are quietly making huge fortunes from their Fixer-Upper business.
##Attn Ezine editors/Site owners##
Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed.
If you do use the material please send us a note so we can take a look. Thanks:
support@fastfixerupperprofits.com Feel free to substitute your affiliate link in place of our link in the resource box.
Earn 50% on every purchase you refer.
Affiliate details are available here:
http://www.fastfixerupperprofits.com/affiliates.htmAbout the author
Sal Vannutini is a successful real estate investor and author of the best selling "Fixer-Upper Fortunes". Free e-book and 6 Part mini-course reveals how to make a fortune in real estate. Visit:
http://www.fastfixerupperprofits.com
The Hottest KISS by:Arvind Kumar Incestuous Relationship Between Football And Marketing by:Arvind Kumar Thousands Sucked Dry By Hard Money Parasites- How To Avoid The Loan Leech! by:The Hard Money Specialist Forex Training: What to Look for in a Forex Training Program by:Raul Lopez Web Conferencing Solutions by:Peter Black Low Cost Or Highly Funded Start Up by:Arvind Kumar The 10 worst mistakes you can make when selling your privately owned small business by:Barry Evans High Cost Of Not - Doing by:Arvind Kumar The Better Product Fallacy by:Arvind Kumar How To Make Multiple Streams Of Income From Net Surfers by:TopeNelson Ola Find Your Love As Early As Possible by:Arvind Kumar Business Center on the Internet by:Michael Fleidervish The Better People Fallacy by:Arvind Kumar