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The vast majority of rehabs are NOT profitable. Here are some that ARE profitable.

Posted by John Reed on

Profitable rehab
The vast majority of real estate rehab do NOT make money. They lose money. But the amount of time that lapses is so great that marketwide appreciation that would have happened withOUT the rehab is the actual source of the profit, but the rehabber incorrectly claims it was his rehab that caused the value increase.
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What types of rehab ARE profitable?
• Adding a bedroom to a one-bedroom house or apartment (Adding a third bedroom is less likely to be profitable)
• Cleaning dirty property by power wash, scrubbing, brass polish brass, etc. is rehab, not just painting or carpeting which are more expensive
• Removing things and not replacing them is cheap but can transform value like overgrown vegetation, junk in the yard, unwanted outbuildings, doors on rooms other than baths and bedrooms, ugly and old appliance
• removing or encapsulating toxic substances like asbestos is often cheaper than people who freak out about realize
• same is often true of another freak-out repair: tilted foundations
• moving walls so that overly large rooms get normal size and the total bedroom or bathroom count goes up
• replacing important eye-attractors like house numbers, mailbox, or a building-name sign
• rehab of the outside of the building is more cost effective than interior rehab
• regrout tile
• remove window coverings that make the home too dark
• pre-Depression houses have more potential for profitable rehab
• resurface cabinets rather than replace

Look for homes that have fewer bedrooms or bath rooms than their square footage normally has. I know of one 1-br house that was profitably turned into a 2br. It originally had a formal dining room and an eat-in kitchen.

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