Rehabs Part Two

Sometimes it takes vision to create wealth. Vision is something that Bill Gates had even in the face with a huge company like IBM telling him he was wrong. The type of vision I am speaking of is seeing a property for what it can be not what it currently is. IBM told Bill Gates that there wasn’t a market for personal computers. The vision you need to have in working with rehabs will not face the scrutiny that Gates did however, it may feel like it at times.

The vision I speak of is not something everyone has. I still can’t believe how many people can’t get past someone else’s choice in paint or carpeting. That is a small bit of the vision it takes to create wealth in rehabs. The main part of the vision I speak of is taking a property and adding value not only from the obvious improvements but also from the not so obvious changes.

An Investor and myself entered a home this week. It was listed as follows: 2 bedroom 1 bath 4 stall garage 800 finished square feet. $129,000 was the asking price. The price was typical of homes with similar bedrooms and finished square footage. The vision that the Investor and I had was in what the home could become. Instead of being just 800 square feet a 3 season porch will be insulated and added to the square footage. With another small change a third bedroom will be added to the main floor and a family room and office will be added to the lower level along with a second bathroom. All of these additions will move the potential price to $200-$220k. The additions including the cosmetics needed to bring the home up to speed will cost $30-35k. The true profit will not come from fixing the problems with the home it will come from what can be added to the home. In this case the additions will come within the confines on the existing framework of the home. No dormers, roofline changes or additions are needed. Staying within the current structure will offer you a huge return if you can have “vision” and it will be less work than a major addition. Look for living space that can be added within the existing framework of the home (attic additions are also another great money maker).

A self-made Real Estate Millionaire friend of mine was told “if it is so easy to make money in Real Estate why isn’t everyone doing it?” He later told me that another self-made Millionaire told him “owning Real Estate sure makes us look a lot smarter than we are!” I would tend to listen to the Millionaire versus the downer friend.

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