With the days of double digit appreciation in the real estate market done, many investors have lost their way. While true the days of buying a property and being able to flip it 6 months later for a nice profit with little work are over, opportunity abounds for those willing to put in the time, energy and commitment.
These days there is a huge opportunity in bank owned properties and short sales. Banks do not want these on their books, and the rough properties that need work can often be purchased for well below market. Contra Costa bank owned real estate is a hot ticket in my area. The East Contra Costa area has seen a huge downturn, and there are many properties on the market. These types of conditions are great to foster the kind of mark downs you are looking for the bank to be willing to take.
Other areas of California that are excellent for picking up rehab type properties very very inexpensively include the Sacramento area and the Riverside area. The Las Vegas area also offers some great buys. If you are willing to put in the time, however, you can find good buys almost anywhere. The main ticket, however, is having the ability to put the work into the properties to enable them to show well. That and obtaining financing for your endeavors.
Many investors are using hard money lenders to finance these acquisition and rehab projects. Hard money loans can often times finance the purchase price of a property, allowing a borrower to use their cash on hand for the rehab work to be done. Hard money rehab lending is filling the void in lending due to the recent credit crunch. While more expensive than institutional financing, they are excellent short term products that can help an investor navigate the current real estate market.
In terms of doing the actual rehab work, it is best if you can do it yourself, or if you partner with a contractor. You will want to have a very good handle on the actual cost of this rehab from the outset, and if you are too conservative with your estimates, your profit is going to suffer. Many investors I work with have dedicated teams doing the rehab for them. Working in this manner is great if you have enough properties to keep your team busy as it helps fix your costs in terms of labor, and also allows you to turn the properties quickly.
On the back end of these transactions, it is also very important to price the property well so you can sell it quickly. The longer you hold it, the more the carrying costs are going to eat into your profit. It is always better to price your property appropriately so it will move quickly. Even in today’s market, a good looking property priced well is going to sell, and for that reason, real estate investors can take heart that their business is not going away, just changing.
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