How to Rehab or Flip a House

Rehabbing or flipping a house can be highly profitable or it can cost you your shirt. The two most expensive repairs are needing a new roof or repairing a foundation. In this blog, I examine the costs and variables that involve replacing a roof if it’s not a deal breaker.

Roof Inspection

When considering investing a rehab or flip, one of the first places you want to inspect is the roof. If you aren’t familiar with roof repairs, you probably need to hire a professional until you learn more about roofs. Even when using the basic rehab cost formula of buying for 30% less than the repaired value can get you into trouble if you underestimate the cost of putting on a new roof.

How to rehab or flip a house involves understanding the damage a bad roof can cause beyond just damaged shingles. By the time there is a leak into the living area, the entire roof system is likely to have serious damage. Besides replacing the shingles (or cedar, or tiles) you’ll have rotted roof decking, damage to the “A” frames, mold in the insulation, and wood, as well as a ventilation problem.

 

Besides inspecting the rooftop, it’s essential that you thoroughly inspect the roof from the inside of the attic. Look for wood damage everywhere. It can start with the decking (plywood) or be in the framing. One sign that the roof is beginning to fail are rusty nails that are letting rain in. Another important part of the roof system to inspect are the plumbing and exhaust vents. Caught early, these can be relatively inexpensive to repair. But once the surrounding wood starts rotting or molding the repair can make your rehab too expensive to be profitable.

Roofing Costs

From hurricane winds to ice dams, different parts of the country experience different roofing damage. The roof is the house’s first line of defense against the weather and is likely to be both the first to be damaged and the most expensive to repair. Roofs are designed to withstand the weather of the local geography. A roof designed for one part of the country but installed in another will have a much shorter life span or even fail from the first bad weather event.

It can cost as little as $6,000 to replace a shingle roof on a 1,400 square foot house. But before you come to that conclusion, consider the many variables that go into replacing a roof. In most locations, you can put up to three layers of shingles on a roof before being required by code to rip off all the old roofs to put on a fourth layer. Ripping off old layers is costly not only for the labor but to dispose of the old materials as well.

Other costs to consider are replacement plywood, flashing, and cement. But the repair costs often go beyond the basics. Even if the “A” frame is in good repair, other costs can include repointing of a chimney, repair of gutters, or resealing of skylights. If you are planning to profit from a rehab or flip, don’t plan on going the cheap route by replacing a tile roof with a shingled roof if the neighborhood is dominated by tile roofs. Doing so will only devalue the property.

Finally, most rehabbing projects are based on upgrading an old house to modern standards. When the roof is involved, this can add additional costs to install skylights and other amenities. The bottom line is that if you’re not a roofing expert and you know there is a problem with the roof, you need to bring in a roofing expert to get a full estimate of the repair costs before making a purchase offer or you may spend more repairing the roof than you estimate to be your rehab profit.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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What did you think of this article? Please leave a comment below.

 

How to be a Landlord

With rents constantly raising, today is a great time to become a landlord. Especially with property values also going up steadily. Rental properties are among the best investments that you can make. However, how to be a landlord is not as passive of an income as some people think.

The best approach to how to be a landlord is maintaining a property that attracts desirable tenants that stay long term and pay the rent on time. Being a landlord means that you are the owner of the property and responsible for the maintenance and repairs. You’ll either have to do it yourself or pay others for it out of your cash flow from the property.  

Beginning to Learn How to be a Landlord

Before buying a rental property, be sure to do the due diligence by analyzing potential tenants. The best place to own rental property is usually in neighborhoods that dominantly have owner occupied homes. You want a property in a neighborhood with a low vacancy rate. High vacancy rates mean that tenants are staying until being evicted and often do a lot of damage to the property out of anger before moving on to coach surfing with friends and neighbors.

How to be a landlord means knowing how to deal with evictions. Formal evictions result in a court judgment. Where you want to start is by screening potential tenant’s court records. If he or she has previously been evicted, you should assume they will fall behind paying rent to you.

One strategy that some landlords use is to charge a high deposit and a high rent for high-risk tenants. I don’t favor this strategy but it can be profitable. I prefer stable tenants in higher quality neighborhoods.

How to be a Landlord is About Due Diligence

Every real estate investment involves due diligence. It’s especially true for commercial properties which are what a rental or even rehab and flip are. These are all commercial deals even if they involve single-family homes.

Some people come to landlording expecting that all they need to do is collect the rent and pay the mortgage. But the reality is that the landlord has a lot of work to do. Preparing the property for occupation can be costly and properly screening prospective tenants can be very time-consuming.

The way I work is by trying to place respectable and dependable tenants in properties. Those that stay long term. Those that at least do some of the maintenance to the house they live in. When you do it this way, you have lower landlord costs and a higher profit.

What is enough due diligence is up to each landlord but background checks should include a comprehensive credit report, eviction reports, criminal reports, and a prequalification estimate based on the landlord’s desired criteria.

When First Learning How to be a Landlord

One of the first things you want to examine is the expenses that come with your investment property. Two of the most common things to look for are potential rental property taxes and homeowner association fees (HOA). These aren’t common but they do exist in some states or at some county levels. When you do invest in middle class neighborhoods, you need to know if there are HOA fees. And you need to know how much that fee is. These can vary from a couple of hundred dollars each year to as much as $400 every month.

Of course, you’re going to have the typical property tax and you need to know how much that is. Some locations require the landlord to be responsible for utilities such as water and garbage. Generally, these are locally owned government utilities.

Learning how to be a landlord also means learning the federal and local regulations. Key among these are the Fair Housing Act and the Fair Credit Reporting Act. Violation of these laws can be very costly. Neither is difficult to understand but you do need to read them and abide by them. You also need to review these regulations occasionally (yearly) to remind yourself and to look for changes in requirements that you need to meet.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

How to be a Landlord

With rents constantly raising, today is a great time to become a landlord. Especially with property values also going up steadily. Rental properties are among the best investments that you can make. However, how to be a landlord is not as passive of an income as some people think.

The best approach to how to be a landlord is maintaining a property that attracts desirable tenants that stay long term and pay the rent on time. Being a landlord means that you are the owner of the property and responsible for the maintenance and repairs. You’ll either have to do it yourself or pay others for it out of your cash flow from the property.

Beginning to Learn How to be a Landlord

Before buying a rental property, be sure to do the due diligence by analyzing potential tenants. The best place to own rental property is usually in neighborhoods that dominantly have owner occupied homes. You want a property in a neighborhood with a low vacancy rate. High vacancy rates mean that tenants are staying until being evicted and often do a lot of damage to the property out of anger before moving on to coach surfing with friends and neighbors.

How to be a landlord means knowing how to deal with evictions. Formal evictions result in a court judgment. Where you want to start is by screening potential tenant’s court records. If he or she has previously been evicted, you should assume they will fall behind paying rent to you.

One strategy that some landlords use is to charge a high deposit and a high rent for high-risk tenants. I don’t favor this strategy but it can be profitable. I prefer stable tenants in higher quality neighborhoods.

How to be a Landlord is About Due Diligence

Every real estate investment involves due diligence. It’s especially true for commercial properties which are what a rental or even rehab and flip are. These are all commercial deals even if they involve single-family homes.

Some people come to landlording expecting that all they need to do is collect the rent and pay the mortgage. But the reality is that the landlord has a lot of work to do. Preparing the property for occupation can be costly and properly screening prospective tenants can be very time-consuming.

The way I work is by trying to place respectable and dependable tenants in properties. Those that stay long term. Those that at least do some of the maintenance to the house they live in. When you do it this way, you have lower landlord costs and a higher profit.

What is enough due diligence is up to each landlord but background checks should include a comprehensive credit report, eviction reports, criminal reports, and a prequalification estimate based on the landlord’s desired criteria.

When First Learning How to be a Landlord

One of the first things you want to examine is the expenses that come with your investment property. Two of the most common things to look for are potential rental property taxes and homeowner association fees (HOA). These aren’t common but they do exist in some states or at some county levels. When you do invest in middle class neighborhoods, you need to know if there are HOA fees. And you need to know how much that fee is. These can vary from a couple of hundred dollars each year to as much as $400 every month.

Of course, you’re going to have the typical property tax and you need to know how much that is. Some locations require the landlord to be responsible for utilities such as water and garbage. Generally, these are locally owned government utilities.

Learning how to be a landlord also means learning the federal and local regulations. Key among these are the Fair Housing Act and the Fair Credit Reporting Act. Violation of these laws can be very costly. Neither is difficult to understand but you do need to read them and abide by them. You also need to review these regulations occasionally (yearly) to remind yourself and to look for changes in requirements that you need to meet.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

How to Screen Tenant Buyers

When you get into the lease option business, it’s important that you know how to screen tenant buyers. How well you screen them makes the difference whether you complete the sale to make a nice profit or end up having to evict them for nonpayment of the rent and have to start all over.

Learning how to screen tenant buyers has several things in common with screening straight up renters but there is a little more to it when you want them to buy the house in the end.

 

How to Screen Tenant Buyers Using a Professional

In my professional opinion, I think you need to personally know how to screen tenant buyers. The biggest reason is because lease option investing is relatively rare. While it is very successful, few investors ever use it. The result is there are few companies that know how to screen tenant buyers. Traditional landlords do use property management companies to screen tenants.

If you do decide to go this route, you can require the tenants to pay a refundable or non-refundable application fee. That way, there’s no money coming out of your pocket and you may even put $20 extra into your pocket (know the laws and regulations in your local area). However, these companies are screening credit reports and criminal backgrounds. They are not looking into your prospect’s ability to obtain a loan and complete the purchase in a year or so.

If you can find a property management company or a realtor that knows how to screen tenant buyers, you can probably pass the cost on to the applicant. Otherwise, you’re going to need to do the screening yourself.

How to Screen Tenant Buyers Yourself

You’re going to begin with the same process as you would if you were a traditional landlord. Screen credit reports, criminal history, employers, and personal references. However, with a lease option you need to go deeper. Don’t be surprised when you learn their credit score isn’t up to snuff. After all, the reason they want to buy with a lease option is because they have problems with their credit score. The question is how much risk you are willing to take?

The place to begin is with a mortgage broker. Knowing how to screen tenant buyers means you already know they won’t qualify for a mortgage. However, a mortgage broker can tell your prospect how far away he or she is from qualifying and what they need to do to qualify. The broker will often help the prospect get into a credit counseling program to improve their credit score.

Your role in screening tenant buyers is having a mortgage broker or lender on your team. You then refer the prospect to the mortgage broker and that broker understands lease options.

It’s your prospect that needs to work with the broker to disclose their full financial situation. What you want your prospect to do is get this information in a written report. You then want to have them provide a copy to you.

You use this report to decide if the prospect is a good candidate for a lease option. From the report, you should be able to determine a reasonable amount of time before they can qualify for a mortgage. Sometimes this is within a year or sometimes it might take two years. I would not accept anyone that is going to take more than two years to qualify.

One important aspect of knowing how to screen tenant buyers is using the information from the mortgage broker’s report to write very specific clauses into the option agreement. Specifically, what steps the buyer needs to take to qualify for a mortgage and when these steps need to be completed. If credit counseling is recommended, write that directly into the option agreement.

That’s how to screen for tenant buyers. However, always know your local laws and regulations.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

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