Of all the steps you may choose to pursue in real estate investment, renovation is probably the most significant.
Done properly, renovation (rehabilitation, refurbishment, restoration all describe a more or less similar process) will establish a profit base in real estate from which all other profit will flow and be enhanced.
I describe here the key issues in renovation that enable it to be such an important factor in a sustainable real estate investment model.
First of all I have to tell you that the buy is the absolute most fun thing I do.
I love to buy houses.
The whole process is almost like a drug to me: There's the thrill of the search; this is followed by the negotiation that everyone involved feels good about in the end; then there's figuring out a plan of action for the rehabilitation; and finally, there's putting everything into place.
This is a blast.
It's all good.
To specifically figure what to buy is best summed up fairly easily: Buy what makes sense for you and your market.
And exactly what is that? Well, first of all you have to be comfortable with what it is you are getting into.
It's not worth setting yourself up for sleepless nights over an investment property you hated from the very beginning.
Your market will make your good and bad investments very clear to you over time.
I will tell you that the investments that start out bad have a tendency to stay that way until you make more of a drastic change.
Tip 1: Obsolete Floor Plan I actually seek out obsolete floor plans that have the ability to be easily updated because they offer me an opportunity to make money.
I've purchased many houses with obsolete floor plans over the years, and have been able to increase value immediately by updating.
In changing the flow and feel of the interior of the house, it becomes more user friendly.
For example, many older homes in my area were built with numerous small rooms and not much thought given to the size or location of the bathroom or bathrooms.
Tip 2: Just Plain Ugly Ugly is the best deal going in my book.
Ugly usually translates into deferred maintenance and therefore one heck of an opportunity to turn things around - overgrown landscaping, exterior peeling paint, and windows boarded up.
The "ugly duckling" of the neighborhood is actually what I look for.
Tip 3: What if the House is Too Small? Smaller houses are an opportunity as long as I can find more room somewhere to reorganize the space.
For example, if it is for sale as a 2-bedroom but has 1,200 square feet of total living space, I will take a look and see what possibilities there are for additional bedrooms.
If it's a 2-bedroom with just 850 square feet, I already know there is no easy way to increase the number of bedrooms within the existing structure.