One of the most important aspects of real estate investment is completing the rehab the right way. Many investors buy "turn-key" properties, meaning the home is already rehabbed at the point of sale. However it is still important to inquire about the quality of the rehab from the broker or seller. If you're buying a property in a different country or state, ask about the mechanical systems and the last time the home was rehabbed. There are two main things to focus on when completing a rehab: an aesthetically pleasing cosmetic finish, and preventive maintenance.
Buying to Add Value
For investors that don't buy turn-key, it's a great idea to purchase a property that needs a little work. This way you can get a solid property significantly under market value. Many investors and primary homeowners are intimidated by larger scale rehabs. This can work in your favor because there is less competition among buyers. Sellers of homes that require a lot of work also tend to be more willing to negotiate. If the house is listed on the MLS you should always schedule a walk-through, preferably with a contractor that can give you an accurate estimate.
Rehabs According to Investment Strategy
Investors buy properties according to two main strategies: Buy and Hold or Fix and Flip. Depending on the investment strategy the type of rehab will vary. If you are buying a property to buy and hold, the objective is to focus on the mechanical systems. The most important things to assess are the home's structural foundation, roof, plumbing, and HVAC system. The foundation should be checked BEFORE purchase since correcting a foundation issue can be very expensive, jeopardizing the profitability of the investment. Also, do not skimp on the main structural systems including the HVAC. For example, always opt to install a new high-efficiency furnace instead of trying to save money by installing a used one. In the long run the used furnace will end up costing you more in repair costs and maintenance. Also, we suggest that you ALWAYS change the entire plumbing system in the home. Opt for PEX instead of galvanized or copper (more expensive) if you are rehabbing a rental property. If you are rehabbing a home with the intention of re-selling it on the open market, its a good idea to use higher end materials. Install granite counter-tops, higher end tile, and fixtures in order to appeal to home buyers.