Prehabbing is a great way to get started in the world of Real Estate Investing and is something that every Real Estate Investor should know about.
Through, MY SMART COUSIN, we help familiarize prospective investors and homebuyers, and particularly Black and Brown folks and women, with the benefits of investing in Real Estate and how can they also Buy a house for the price of a car. Perhaps even more importantly, as a Real Estate Investment coach, we guide you on how to take your finances to the next level and generate a continuous source of income.
WHAT IS PREHABBING AND HOW DOES IT WORK IN THE REAL ESTATE MARKET?
Prehabbing at its most basic level is preparing a house for the more extensive work required for a large renovation. Prehabbing a home usually involves doing minor renovations to a property and then selling it to an investor. A house that’s full of debris or has significant damage to only a small area of the home can narrow the pool of potential buyers. Prehabbing can make the property easier to sell by giving it more curb appeal and raising fewer red flags. The minor renovations pay for themselves and then some by increasing the perceived value of the property and its ability to become a successful flip. In turn, this increases profits through appreciation-oriented sales strategies like those used by buy and flip investors.
WHAT ARE THE BENEFITS OF PREHABBING FOR INVESTORS AND HOMEOWNERS ALIKE?
Prehabbing a property has several benefits:
· It can shorten the timeline between purchase and sale and thus lead to a faster fix and flip.
· The upfront capital required to prehab a property is significantly lower than performing full-scale renovations. Less upfront capital lowers the risk of recouping all of your investment on sale.
· A higher profit on sale can be achieved, thus increasing the return on investment.
HOW CAN YOU GET STARTED IN PREHABBING?
Whether your home is your primary residence or it’s an investment property, readying it for sale rather than taking the what-you-see-is-what-you-get approach with buyers is key to adding value. Buyers, even buyers who are investors, need to be able to see the potential upside of a property. If all they see are problems, they might not be able to get past them and consider the house as a good investment. Addressing a large eye sore such as holes in a wall or in the floor can help put the house in its proper perspective. Paint, as an example, goes a long way in helping buyers see the positive aspects of a house. Whether your prehabbing work involves a complete paint job, new cabinets or landscaping, or bigger jobs such as addressing structural issues with a floor, this work can help homebuyers and investors see the remaining small handful of problems rather than a long and overwhelming list.
Another benefit of prehabbing versus rehabbing is that prehabbing limits the amount of cash you tie up in a property and puts a cap on just how much you’ll spend before getting into full-on the gut-renovation territory. By doing a clean-out of the property and tidying up minor cosmetic issues, you provide a clean slate for someone who is planning more extensive renovations.
Keep in mind that when prehabbing, you should always prepare the property for its next owner. While fixing small issues like plumbing or painting may seem insignificant at first glance, they are crucial parts of making sure everything will go smoothly in the marketing process.
Let’s take a look at the basic improvements that should be done when prehabbing:
· POLISHING AND CLEANING FLOORS
You can clean the floors while prepping for buyers. Make sure to keep the home presentable by polishing wooden floors and vacuuming carpets. You want this space ready so that when an investor comes through, you’ll be their first choice.
· PAINTING
A fresh coat of paint should be an essential part of any home renovation. The appeal and beauty will surely impress buyers, while also making your property look better in photos and other marketing materials.
· CLEANING
Giving your home a good once-over will make it much easier to sell. Be sure to thoroughly clean it with the help of a cleaning service, and check for peeling paint or spots heavy with mildew. Take care of these small details before showing the property so buyers won’t attribute a large cost to fixing what are ultimately minor issues.
· BRIGHTEN THE HOME
You know what they say—let there be light! If the house is overly dark or gloomy, consider turning on the electricity and brightening it up with a few lamps.
SUMMING IT UP
Prehabbing is a great way to get started in the real estate market. It can help you learn more about the market and how different factors affect prices. For investors, rehabbing can be a great way to find undervalued properties, spend a small amount on improvements, and sell them to an investor or homebuyer. Contact us to learn more about how we can help you get started today.
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