We founded our real estate development and investment firm, Restoration Remedies, LLC, around charting the complicated waters of distressed property flipping. Our firm rehabs distressed residential properties that enhance home values and neighborhoods throughout chicago and the suburbs. We maintain a solid team that identifies good investment opportunities every week and works together to make smart strategic decisions.
If you are an agent looking for the right investment property, be sure any distressed properties you consider meet important criteria, including standards you’ve set for location, condition, layout, purchase price, construction cost and resale price. Our company uses the same criteria. The location must be in an area we deem desirable, as the surrounding neighborhood always impacts the value of real estate. Assessing the strength of the local economy and school district are also necessary factors.
When choosing a home to rehab, we recommend not looking for teardowns. instead, seek properties with “good bones.” it’s for this reason that our company typically buys brick homes with practical layouts, three bedrooms and two bathrooms -- or at least space to add a third bedroom and second bathroom.
Acquiring the home is the most important part of the entire investment process. The goal is to purchase the home at a low price, rehab under a certain budget and resell at a profit. You can achieve this by researching which distressed properties are to your best economic advantage to flip. Advance research will help you avoid the mistake of overpaying. Do your due diligence by looking into the pricing history of cities and villages. For instance, when we decided to buy a home in Park Ridge we noticed the percentage decline of our acquisition was much greater than the decline of a home we purchased in Niles. Because these two suburbs are right next to one another and Park Ridge had a higher median price than Niles, we knew we were making an acquisition with much more upside potential.
Beware the trap of falling in love with investment properties. Do not fall into this trap! Adhere to your business and financial goals to stay on course throughout the rehab process. Every property has a market sales price. However, investments are not guaranteed. Be prepared to possibly lose money. To help avoid that potential, review this list of 10 pitfalls investors make when rehabbing a home:
1. Not aligning with a broker who’s an expert in the neighborhood
2. Not researching the property beyond the internet, MLs and REO listings
3. Not knowing your competition
4. Budgeting too optimistically
5. Being unaware of a property's building code issues
6. improper property management
7. Not having the correct insurance
8. Failing to purchase a home warranty
9. Not having an exit strategy
10. Not standing behind your product
Complete your investment rehabs with the highest level of craftsmanship. When the job’s complete, have the homes professionally cleaned and list them yourself or with the broker you’re aligned with in the neighborhood. stand behind your product and stay in touch with new homeowners after the closing to make sure they are satisfied. We recommend backing every home with a warranty. Our company issues 13-month home warranties from HomeWarranty of America (hwahomewarranty.com).
It’s also important to make sure your investment properties are properly insured in case of tragedies, such as fires, floods, thefts or vandalism. Our associate, Fields insurance services, inc., is just one of the licensed public adjusters that can act as your advocate and help maximize recoveries/claims (www.fieldsinsuranceservices.com).
As an investor, you have an interest in making sure each and every one of your rehabbed properties is of the highest caliber. if you are considering rehabbing a distressed property and want to up the odds of a successful flip, know who is buying and rehabbing what, and where, in your area. know your total costs, from acquisition to rehab to resale. Be realistic and conservative with your budget, and don’t be afraid to ask other investors for their advice before making a decision. Good luck.
All rights reserved. All information deemed reliable but not guaranteed. Chicago Realtor Magazine, http://viewer.zmags.com/publication/54e53a67#/54e53a67/22