As the president in charge of acquisition activities at Studio Residences, Marco-Abel Nordio has acquired a great deal of practical experience in renovation and rehab services during his career in the real estate industry. In most cases, three key factors can determine the financial success and profitability of these property renovation projects.
Acquiring distressed properties at the right price for profitability can be challenging. Presenting lowball offers to the current owners can poison the well and render further offers on the property less acceptable. Conversely, purchasing these properties at too high a price can eliminate profit for investors after rehab has been completed and the property is offered for sale. Performing due diligence on market prices and comparable sales figures and researching the current condition of the property can provide a greater degree of control during the negotiation process and can allow investment firms to consistently acquire the right properties at the right price.
Consider both macroeconomic and microeconomic conditions, which can play a significant role in determining the value and salability of properties in the real estate market. The scarcity or abundance of homes on the market can have a major impact on prices on a regional or local basis. On the national level, mortgage rates and loan availability can be determining factors for profitability in real estate transactions.
The overall condition of the home should be considered when identifying good candidates for rehab investments. While many cosmetic problems are relatively easy and cheap to fix, foundation problems and electrical issues can often cost hundreds or thousands of dollars that comes directly out of the potential profits investors need to make these projects worthwhile.
By considering these factors when choosing rehab properties for renovation, real estate investors can protect their financial resources and ensure maximum profitability in this volatile segment of the housing marketplace.