Renovating vs. Rehabbing ... Is There A Difference?

Renovating houses has been on my mind for a while now. As most of you know, last year we were in the Philippines. During the time we were there we were having my Father-In-Laws house renovated. I had to stop and wonder about just why we do renovations on properties that we own.

With a personal residence we do so for a variety of reasons: update the house to keep it current, add new features to make it more livable, make things bigger or just more functional. But with investment properties that we are going to be selling or renting there are really only three reasons we renovate:

1. To maximize the resale value
2. To attract buyers or renters
3. To sell or rent the property quickly.

We need to do all of that while keeping in mind the budget and the speed that we can complete the tasks.

When I talk to a lot of new investors they still look at the rehab as if they were going to move into the property. They want to renovate the house to its maximum potential, adding rooms, enlarging kitchens and baths, putting in granite and high end appliances. They think that they need to do all of this to achieve those three previously stated goals. But let me tell you that from personal experience you do not have to go to extremes.

First, do you understand the differences between the two classifications to renovating a property: Rehabbing and Remodeling. The difference between the two is easy; are you moving walls? And are you required to pull permits? If the answer to those questions is yes then you are doing a remodel. I draw the line at rehabbing. It is faster, costs less and I can maximize the value of the property while maintaining my tight deadline.

I typically concentrate on the two areas that sell most homes, kitchens and baths. This is where I spend my time and money. I also paint the interior of the property and update the carpet and flooring. I usually upgrade the doors, trim and molding to a similar look of a high end property. I replace the light switches, outlets and covers, as well as the door hardware to make the things that people touch feel new. I duplicate the look of a high end home by putting in fixtures that are knock offs of those high priced items in the Street of Dreams houses.

The landscaping and curb appeal are important as well. I make the house inviting to those passing by. I want people who see the for sale sign in the yard feel that they must take advantage of our instant open house to see what this house looks like. My goal is to make the potential buyer just die to have this house as their own. Whether selling or renting you want the same emotion from your customer.

But contrary to conventional wisdom I will spend a fraction of what people expect and get in and out of the house in record time by following the systems and procedures that we have in place. By using the proper professionals and having a standard list of materials I have this down to a science. Our goal is maximizing the value of the house; while obtaining the highest return on investment for the money spent.

And please remember, time is money when you are rehabbing. Every day you go over your allotted time you are losing money and not just the holding costs. If you miss the peak selling cycle you can loose your entire investment if the price of housing declines or interest rates rise.

Systemizing your business is where you make your profit in this business. Streamline and automate tasks with checklists and requirements for your contractors. Work with those best expert professionals who can do your tasks properly the first time without having a bunch of call backs. Do your job up front to minimize change orders and you will find that you are able to achieve your goals of getting the house sold soon after you purchase it.

Making money faster is the only way you can survive. Cash is king, having equity tied up on a house that you are trying to sell will not put clothes on your back or food on your table. So get that rehab finished and cash the check. Then go and do it all over again. That is the business that you are in.