From many applications for funding that come to us every day, a big portion is for rehab loans in Washington DC. No wonder, the DC rehab market continues to offer profit margins that are rarely available in the surrounding areas. Rehabbers in the DC area have been consistently making money buying dilapidated properties and turning them into beautiful homes. Their continued success, however, is attracting less experienced (and less well-heeled) investors and driving the competition for distressed properties. As a result, DC continues to offer terrific investment opportunities, but is also a market where it’s easy to make mistakes.
In the real estate rehab business you make your money when you buy. However, as a hard money lender, I cannot emphasize enough the importance of a well-planned and efficient renovation process. Your general contractor and crew can make you additional money or, at minimum, save you time and hassle. Alternatively, they can drain your profits and make your life a living hell. So how do you avoid being driven nuts managing them? For starters, try to avoid these six costly mistakes:
Recently we had a client that approached us about doing a fix and flip loan for a property he was considering. We do these a lot so I was glad to help him and began asking him a few questions. When we got to the subject of how much financing he needed he said he wasn’t sure. He said he could guess the amount, but he wasn’t sure what to consider when estimating the rehab costs. Trust me, when it comes to a fix and flip loan, you don’t want to borrow too little or too much. Either way can get you into trouble. I can’t tell you everything that you will need to consider when you begin estimating the cost of a rehab, but I can give you some general places to look.
Rehabbing properties in the Greater Washington DC area can be very rewarding both financially and emotionally. However, you have to take an active part in the process. This means picking the right contractor and making sure they get the job done right and on time. As hard money lenders we’ve seen great investment opportunities turn into a financial disaster because of borrower’s inexperience in managing contractors. In this blog, we share five great tips on how find a right contractor and manage your rehab to maximize your profits.