Nothing can drive a real estate investor to the poor house faster than a rehab gone bad…and talk about losing one’s cherub-like demeanor!!!
I know two investors who partnered on a deal in June 2014. They bought the property for $25,000. They estimated the rehab would cost between $25,000 and $50,000, and take about six weeks to complete. That rehab is still going on – 6 months later! Oh, and the rehab expense now sits at a whopping $85,000! Here’s the really sad part: The investors are related – their strife caused the family to cancel Thanksgiving AND Christmas! All because of a rehab gone terribly bad!
Think this can’t happen to you? Think again! A rehab can go south in the blink of an eye! Your rehab is going along just fine – on time and on budget. Then suddenly you find yourself chin deep in a pit of quicksand – and sinking fast! It’s a terrible feeling…but it can be avoided!
Due diligence – before you buy a property – is what keeps your deal safe! Constant tracking and follow-up during the rehab keeps you out of the proverbial quicksand.
A good example of a lack of due diligence is the above deal. When I asked the investors about their estimated cost of rehab, they said, “Between $25,000 and $50,000.” That’s a $25,000 swing! There’s no such thing as a $25,000 swing when estimating a rehab. You’ve got to know your…