Let’s take a walk on a different side of Residential Real Estate. Let’s talk about Rehab Investing. Rehab Investing is a whole new world. It is solely dependent upon:
- Return on Investment
- Risk Management
Return on Investment
Is this a profitable venture? There are variables that you can make close estimates on,such as Estimated Resale Value (if you are immediately selling), Cost of Rehab, Maximum Allowable Offer, etc. They can give you an estimated return on investment. You want it wide enough that you are still making a decent return on the money you are investing.
Is what you are estimating for Cost of Rehab going to be true or did you buy yourself a money pit? You really need trusted contractors (unless you are one) who are able to advise you on the repairs needed for the property. You can do guesstimates from photos, but having a professional look at the property inside and out, before you invest, is the wisest of choices especially when the bottom line is the profit you make.
What is your tolerance for risk? If you are a play it safe type of person, bonds and money markets should fit your strategy better than trying out Real Estate Investing. However, if you value learning and have the propensity to be able to make intelligent estimations, Real Estate Investing may be a good fit for you. It is managing the risk and having Plan A, Plan B, and even Plan C. The two major risks are in the rehab costs and in reselling the property. However, if you have or are a trusted contractor and you are able to sell the property at or slightly below the average market value, it’s worth the risk.