8 Benefits of Prehabbing for UNFAIR profits
Picture this… YOU… flipping houses faster, with more certainty of profit, by greater volumes, month after month, making you wealthier and your family happier.
I don’t know about you, but that sounds pretty good to my ears!
Now, I know what you’re aksing (with a healthy sense of skepticism), “How?” Well, the answer is by using a simple exit strategy with your investment properties that, perhaps, you’ve never considered before. It’s called prehabbing.
So what is this magic bean called prehabbing? How is it different? And why could it make all the difference in your bottom line this year?
Prehabbing Houses 101:
Well, as the name suggests, ‘prehabbing’ homes is the happy medium that sits between doing a full gut rehab and wholesaling a home as-is. Oh, and there’s nothing magical about it. Prehabbing is, generally speaking, making only low-cost aesthetic and possibly HVAC/electrical improvements to a property that make a house more attractive to a retail buyer than an unmodified wholesale property would be. To use the old saying, “it’s putting lipstick on a pig”.
Exactly how extensively you prehab can range widely from simple a clean up to replacing kitchens, depending on personal preferences and the property in hand.
The prehabbing exit strategy can have tremendous advantages in the current market. It can simultaneously reduce risk, increase profits, and propel deal flow…
So, if Prehabbing’s So Great, Why Isn’t Everyone doing it?
So if prehabbing is so great, why isn’t everyone doing it?
There’s still certainly a place for pure wholesaling and investors that aren’t afraid of digging into gut rehabs. However, many investors are simply plugging away at the status quo because that’s all they know, not because it’s the best possible option.
They simply lack the knowledge or systems and many are stuck in a rut.
Worse, a few investors today are flapping around in a panic as the market evolves and they aren’t seeing the growth they etched out on their goal lists.
That’s where prehabbing steps in. Prehabbing can make more deals viable, and it certainly checks the boxes of the concerns of many looking for more deal flow, certainty and income.
8 Benefits of Prehabbing:
Some of the benefits of prehabbing houses include:
- Faster turn times
- Speed to market
- Increasing number of monthly and annual flips
- Enhanced total annual and lifetime returns
- Less cash or leverage required
- Having a larger pool of end buyers to pick from
- Less risk and lower odds of unexpected expenses
- Easier out of area investing and virtual wholesaling
Inside a Prehabber’s Mind…
You get in, out, and paid, fast!
Prehabbing is about maximizing the value of a property and getting it sold faster and for more money. This propels you from deal to deal, enabling more turns, with a lot less hassle.
Recently rehabbers, especially the green ones have rushed in without any form or system except what they learned from an episode of reality TV on flipping houses, only to run into issues.
In contrast to full rehabs, light improvements mean less likelihood of creating more problems during renovations, and avoiding all of the stressful and expensive pitfalls of major rehabs. Many are sinking tens of thousands into homes that they’ll never, ever get back.
Bloomberg recently highlighted the perfect example of this when covering a ‘boutique’ Southern California investment firm which said it would use millions of dollars to by luxury homes and then plow in even more than the acquisition cost in improvements. Good luck. But burying cash into improvements that many buyers are going to rip out anyway or don’t add any tangible value and then trying to sell that home above market value doesn’t sound like the soundest and most sustainable investment strategy.
Perhaps all you need to do is mow the lawn and haul away some junk to be able to put a bargain priced foreclosure home on the market for full price. Or may be a new coat of paint, some carpet and a couple of vanities is all it take to make a deeply discounted home an extremely attractive, rent-ready cash flowing machine for a buy and hold investor.
Clearing the slate, helping prospective buyers see the potential and making further improvements look easier to the next buyer, or making a couple of tweaks that make it ready to rent can add profits fast.
If your goal is to flip houses fast and make the most money at the end of the month then seriously consider prehabbing as an option.
If you don’t want to be the guy sleeping in his leased Mercedes Benz, in the driveway of the house he plowed 6 figures into rehabbing but hasn’t been able to sell for 6 months because the repo guys are coming, and Operation Repo is the only reality TV show he’s likely to be featured on – then think prehabbing!
Stay tuned in for the next post to discover how to find the best deals for prehabbing houses for fast profits…