It’s easy to tell yourself one day that you want to get into real estate rehabbing and even easier to find a rehab house that you think is just perfect for the job. What’s not so easy is making the profits, selling that house or even fixing it up. In fact, it’s quite easy to make mistakes during your first few projects and lose your investment or at least your profits.

Yet, with a little preparation finding, fixing and selling those fixer upper houses will be a lot less of a chore and more like the other easy things you like around rehabbing. There are a lot of mistakes a rehabber can make, but in particular are five golden mix-ups that are sure to put a bind in any real estate investor’s day.

1. Paying too Much for the Fixer Upper Houses
2. Trying to Do it all Yourself
3. Not Getting the Right Contractor for the Job
4. Not Enough Money to Complete the Project
5. Bad Exit Strategy to Sell that House

Paying Too Much for the Fixer Upper Houses

Did anyone ever tell you that it’s important to buy low and sell high? Well the same rule applies in real estate rehabbing. You can’t pay too much for that rehab property or else you won’t be able to sell it for enough to earn your profit or break even.

Before signing papers to purchase a potential fixer upper, do your research, your due diligence. Check to see how much property is selling for in the surrounding neighborhood. Compare this to the asking price of the rehab property. Get an inspection of the property so you know what sorts of repairs it’s going to need. Ask contractors to figure up estimates for those repairs and any renovations you plan on making. Add all of that together, plus the carrying costs such as electric and utilities you’ll be paying while you own the property to the asking price. Is it still less than the average asking prices for similar properties in the area? If it is, is there still room for your profits of at least $10,000? Plus, you’ll need a good amount of wriggle room in case those contractor’s estimates are too low.

If it’s not, then you’ll either need to renegotiate the asking price with the homeowner’s or walk away. You can bring all of your research into the negotiations if you need. Show them how much it’s going to cost you to fix up this property, plus your own minimum profits as reason to ask for a lower price.

Trying to Do it All Yourself

There is a tendency on the part of some real estate rehabbing investors to try and complete the rehab all by themselves, especially first timers. Fixer Upper Houses are often in need of some tender, loving professional care. So, even if you are the world’s greatest carpenter and your cousin Fred knows a little something about plumbing, it’s a good idea to add a few contractors to the work list.

Real estate investors can take care of plenty of things on their rehab property, painting, stripping, landscaping, cabinets, flooring and even heavy labor. However, not every rehabber knows about electrical, plumbing, carpentry, roofing, and more involved elements of construction. These are things better left to experienced professionals so you don’t end up wandering the halls of your project with singed hair and a dazed look.

Kidding aside, take a good long look at the fixer upper houses you intend to buy. Establish beforehand how much work you want to put into each and what kinds of contract labor you’ll need. That way you’ll figure the costs of hiring some help into your purchase offer and it won’t seem like such a big expense to get that plumber or roofer for the work.

Not Getting the Right Contractor for the Job

Some might say that hiring a contractor is like bobbing for apples. They’re elusive, hard to snatch up and sometimes you’ll be left holding your breath for the project to be completed.

Not all contractors are bad contractors. Plenty of them are hard working, practical, stable individuals, probably overworked too. Since, these good contractors often have months of work lined up with other clients. So, you’ll see where the elusive part comes in as you may end up waiting a couple of months for the contractor to come out and complete a particular job.

It can be tempting to take on the first contractor that you find with time to work on the project immediately. This is a great opportunity if the contractor is a good one. Take the time to ask for references. Ask him or her if they are licensed in your state. This may seem like so much extra time wasted, but you’ll have to be the person to fire that contractor if their work goes sour. Are you up to firing someone?

All little research on your contractor for that potential real estate rehabbing project can greatly reduce the likelihood of having to fire a contractor for any reason. It also reduces the risk of hiring a contractor that’s going to do a sloppy job.

Not Enough Money to Complete the Project

A lot of first time real estate rehabbing investors make this mistake. As they sometimes say it takes money to make money. In the case of rehabbing property this adage is true. You’ll need to make sure you have enough money on hand, in credit or in loan form to complete the rehab once it’s started. There’s nothing sadder than a half finished house sitting empty for months at a time.

This is the kind of mistake that can really bring a real estate investor down. If you can’t pay for anymore work or to keep those utilities on or the mortgage on that property it’s going to leave you scrambling for options. One option may be to sell the house as is and hope for the best, another could be a hard money loan or worst case scenario, the property is taken back by the bank and you lose your investment capital and your credit.

Be sure to have enough money on hand to finish that fixer upper house, not just purchase it. There are a variety of ways that investors get money for the carrying costs. Many get credit cards with high limits, but this can be a bad practice with the rising interest rates today. Others have their own money saved up or earned from previous investments are able to take care of costs as they come. Most rehabbers get a loan like a construction loan from the banks or a hard money loan from private investors to take care of their daily costs and pay off the loan after the sale of the property.

Bad Exit Strategy to Sell the Property

You’ve got to market those fixer upper houses once they’re rehabbed and market them to the right people. The right people are your potential buyers and what is called the ‘target audience’.

It’s easy to forget who you are fixing up that property for. New real estate rehabbing investors may start adding renovations and styles to the house that they personally prefer. However, this house is not your home. It is a business opportunity and as such should be remodeled in such a way that it will most likely sell.

Since you’ll be selling a rehabbed property you can do well to place it on the traditional real estate market. A realtor can really help you in staging the home and bringing in the right clients to look at the property. The realtor can also help at the start of a rehab with suggestions on the right kinds of renovations and color palettes to choose when adding paint and final touches. Just don’t let the realtor take over.

Sometimes they get a little too involved even asking you to complete major expensive renovations before they feel comfortable showing the property. If it’s simply not in the budget, say thank you but no. If the realtor can accept it, move onto someone else.

These five ultimate rehabber mistakes are fixable, if you have enough sense to switch tracks or go back to the basics when you find that a rehab has suddenly gone wrong. However, it’s a lot easier to just know what the mistakes are beforehand and avoid them on all of your fixer upper houses.