4 Reasons to Ditch Rehabbing & Rely on Double Closings
There are many real estate investing gurus and programs out there promoting fixing up and flipping homes, yet far too many individuals are jumping in poorly equipped to make great buys or deal with the nuances of rehabbing properly, at least for maximum profits.
However, even for the pro DIY weekend warrior there are some powerful arguments to ditch this strategy in the current market and stick to instant flips with true wholesaling…
1. The High Cost of Rehabbing
Building material costs are already sky high and will only continue to go up as the economy improves and inflation balloons. A new National Association of Home Builders survey puts this as the top concern of U.S. builders as of last month, and if they are worried with the discounts they can get, everyone else should have an eye on it too. On top of this many are seriously underestimating the coming rapid rise of labor costs and competition for the best talent that will make this a difficult strategy to scale in coming months.
2. The ROI is Miserable
Far too many flippers are either over-improving or under-improving homes and burning precious working capital while actually reducing their true ROI. If you gut the house and redo the interior but neglect to replace the worn roof that prevents any buyer from obtaining insurance on it, it’s all been a waste. The same goes for dramatic makeovers that don’t add real appraised value. When you take time, labor and effort into consideration the ROI is often a lot lower that flipping these homes as is, especially if they can be leveraged with 100% LTV flash funding.
3. Not Necessary
With the presence of discounts, distressed properties in many forms and a variety of motivated sellers combined with rising home values, there is plenty of spread to cash in on without digging in and getting your hands dirty. So why bother?
4. Double Closings Reduce Risk
Not only does rehabbing come with a good share of pitfalls itself, any period of time a property is held means risk and a variety of threats. Using transactional funding for double closings dramatically reduces any risk and ensures greater overall profitability.
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