Renovate and repeat
When a client is first starting out in the industry, it can be important to remind them that less is more. With heavy rehab, ground up construction or even long-term rental ownership that leads to property management, there are plenty of more nuanced avenues an investor can take when beginning their career.
There’s a lot that can get in the way when an investor tries to take on too complex of a project. With heavy rehab projects, renovation budgets can be high, timelines can be lengthy and tight and as a result deadlines can get missed. Now, while a new investor certainly is capable of completing a project with a larger scope, with the potential pitfalls even a completion doesn’t guarantee profit. As for ground up construction, those issues only get magnified and there is a lot more paperwork and documentation requirements. Building an entire property is much more of a task than even undertaking a substantial renovation project. There’s a lot to learn and understand in those cases whereas the smaller scale flips are closer to a sure thing when first starting out.
With long-term rentals, the passive income is appealing, but landlord responsibilities and property upkeep can become a pain for the investor. Rather than focusing on securing their next property with sufficient capital in hand, they are tied to one property trying to appease tenants and make sure the property stays livable and presentable for the long haul. The income generated from a rental can be stable, but it is incremental at first.
With a fix and flip strategy, the formula can be straightforward and repeatable. Find a property below market value in need of a facelift, secure the purchase and complete renovations, and sell for a profit all within a few months’ time to maximize returns.
There’s also the added bonus of finding trusted contractors that can work alongside the investor to ensure some of the more complicated or technical work gets completed properly. This is an easy industry relationship to maintain for a new investor, and if the contractor catches wind of the repeat business, they are more apt to make themselves available for the investor client and that becomes a win-win. Brokers can help their clients vet contractors, and while one project is in progress, the broker can try to find the next property that fits the investor’s budget and experience level.
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