I am trying to find properties to rehab but am having trouble deciding which areas to invest in. I live in Los Angeles and there are so many submarkets within the city that all vary in market conditions. What should i look for in an area that would prove to be an ideal market to invest in for rehabbing? I know areas that have a lot of recently sold properties is one good indicator but was hoping someone could help me with a few more pointers in what to look for.
THANKS
Areas with a lot of sold houses is a great place to start. Other considerations are the price point, look and feel of the neighborhood.
It is easier to sell in the neighborhoods that the widest pool of potential buyers would want to live in. This should cancel out any desire to rehab and flip in a war-zone for instance.
My litmus test is “would I send my teenage daughter to the neighborhood at night” If I answer no then I figure a lot of people will say no to that neighborhood. On the other extreme, if you go too high in price then not as many people qualify for financing in those neighborhoods so look for median priced, nice, working class areas and you should be good to go.
Jim
Thanks Jim great info. Could you tell me where you go to find most of your deals. I know searching court records to find short sale deals from motivated sellers is a good way to get great discounts but dont really want to wait months for the banks work out the deals so I mainly go after REOs through listings or agent recommendations, however, with this info being so widely available on MLS etc im not sure its the most effective method to get the best discounts. Any tips? Thanks again.
[QUOTE=Pax77;883637]Thanks Jim great info. Could you tell me where you go to find most of your deals. I know searching court records to find short sale deals from motivated sellers is a good way to get great discounts but dont really want to wait months for the banks work out the deals so I mainly go after REOs through listings or agent recommendations, however, with this info being so widely available on MLS etc im not sure its the most effective method to get the best discounts. Any tips? Thanks again.[/QUOTE]
Pax,
I thought you were asking about rehabbing.
With the post above we seem to be now focusing on hunting for a deal. Deals that might not even need to be rehabbed. My point is a strategy that is too scattered will result in poor results.
When you say “best discount” how would you define best? What is important to you in terms of a discount? Are you trying to get a low price so you can flip the property without doing any work or even completing your purchase?
Some folks who look for a profitable rehab will focus on properties that have not been updated for a long time and where they could change the layout with a possible room addition. The smallest house in the neighborhood is one way to think of it. In some cases, a house that is on a large or double lot where no work is needed to improve the house could still be a good deal. Some will tear down a perfect house to build 2 or to build a much later McMansion. Or the lot can be split off with no work completed on the current house.
The examples above are to help share the discussion as there are many ways to improve a property and therefore target the search. What do you like to do? Tell us about your past rehab projects and what tends to have worked for you.
All good points… Changes with Fannie and HUD recently have made it a little more challenging to find great REO deals.
There are a lot of different marketing techniques you can use for generating motivated seller leads and I will be starting a CREonline article series on them in a few days…
Jim
Local Area
One have to invest either his/her local area or where he/she populated and known this area’s marketing condition.Before investing anywhere have to consult with senior on this line.
[QUOTE=John_Corey;883639]Pax,
I thought you were asking about rehabbing.
With the post above we seem to be now focusing on hunting for a deal. Deals that might not even need to be rehabbed. My point is a strategy that is too scattered will result in poor results.
When you say “best discount” how would you define best? What is important to you in terms of a discount? Are you trying to get a low price so you can flip the property without doing any work or even completing your purchase?
Some folks who look for a profitable rehab will focus on properties that have not been updated for a long time and where they could change the layout with a possible room addition. The smallest house in the neighborhood is one way to think of it. In some cases, a house that is on a large or double lot where no work is needed to improve the house could still be a good deal. Some will tear down a perfect house to build 2 or to build a much later McMansion. Or the lot can be split off with no work completed on the current house.
The examples above are to help share the discussion as there are many ways to improve a property and therefore target the search. What do you like to do? Tell us about your past rehab projects and what tends to have worked for you.[/QUOTE]
Thanks for the response. I was talking about rehabbing in terms of that being my ultimate goal and “hunting for a good deal” as one of the steps in the rehabbing process.
I am definitely looking to put work into a property so not necessarily looking for property with equity already built in that doesnt need work.
I am looking for either houses that are already in good shape just needing updating or damaged property that needs repair. It seems for rehabbing purposes and wanting to be able to acquire, fix, and sell quickly that REOs and FC auctions are the two best options. However I know REOs are competitive and auctions are a crap shoot.
I have been investing in rentals for the past 7 yrs but as far as rehabbing goes I have only renovated rentals that I still own. So basically just trying to see what you guys would suggest as the best method for acquiring property for quick in-n-out rehabbing purposes.
Thanks for the advice.
For a quick turn, you need to limit the work to stuff that is really cosmetic. Nothing that will involve a major project. Hopefully nothing that will require structural changes, opening walls and other things that can lead to surprises. Paint, clean, and other things to dress up a place.
Quick turns will incur transaction costs. If you want to maximize the returns you would be slightly better off if you never had to actually buy the place before doing the work. Not a prefect strategy given your position is less certain (you do not have title). THink of it this way. If you have buying and selling costs that can be a big chunk of change if you are doing a light, cosmetic rehab. If you can eliminate the buying & selling costs you will greatly improve the profits.
I tend not to like SFR rehab projects as they can become labor intensive with surprises. One guy I know who would complete about 100 a year felt that he would only take on homes where the rehab was 10% of the house value or less. Another guy had some luck with finding a junker and then just cleaning up the trash, there weeds and putting a coat of paint on the front only before selling it on as a handyman special.