Rehabbing of houses can be a very lucrative profession and especially in strong real estate markets. In addition to being a stand alone business opportunity, all note brokers should work to build relationships with both local entrepreneurs involved in this business as well as those out of the area through social media. It is not uncommon for rehabbers to offer owner financing on their projects after repair and upgrading. The owner financing provides the ability for the rehabber to generate “top dollar” pricing for the real estate sale. These are new notes in the making that may periodically need to be sold to bring in cash for the next rehab project.
Big Business for “Handymen” (and Women)
Rehabbing is BIG business and especially for those with the ability to do a certain amount of their own work. To score big in the rehab business requires that you become a good manager and estimator. Successful rehabbers…
- Are ESTIMATORS: To be successful as a rehabber, you will need to know how to estimate repairs in order to bid on the home and project successfully. You will need to know the cost of installing a new kitchen, bathroom, windows, etc. BEFORE you bid on the home. Most rehabbers shy away from homes that have serious structural problems.
- Use LICENSED CONTRACTORS: While you can do a lot of the work yourself, its imperative you use licensed contractors when effecting repairs on such things as air conditioning systems, major electrical work, major plumbing work, etc. Many rehabbers will additionally use contractors on carpeting and flooring installations.You will typically need to provide a certain amount of “upfront” money to your contractors for supplies and this is another reason to use licensed contractors as they will tend to be more trustworthy stand behind their work.
- Are LEGAL: Professional rehabbers pull the necessary permits for specific jobs and protect themselves from stop work orders and even worse, lawsuits that can be generated by disgruntled home owners after the home is flipped. Pulling permits and having inspections can protect you from unwelcome surprises.
Networking With Rehabbers
For note brokers, creating relationships with rehabbers is a good practice. Many rehabbers know they can get “top dollar” and more for their projects by offering owner financing. In the past, this was short-term owner financing through the inclusion of a balloon payment in the mortgage note. Dodd-Frank now prohibits such balloons and “aging” projects has become more difficult, but not impossible.
When meeting rehabbers and especially those new to the industry, make certain you let them know about your abilities to purchase or broker owner financed notes. If you are an investor, explain your buying parameters, seasoning requirements and interest rate expectations. Having a good list of rehabbers can mean a steady supply of future notes to invest in or broker.