Top 10 Mistakes Real Estate Investors make During Property Rehab Turning distressed residential property into a quality home can be very lucrative as long as you avoid these ten common mistakes. 1. Paying too much for a property: You make your profit when you buy a property at an excellent price, not when you sell it. Focus on negotiating a great price, and you will have "wiggle room" to make numerous mistakes. But if you pay too much for the property, the slightest unplanned repair can eat up your profits. Focus on buying smart and learn to work only with truly motivated sellers or banks. Don’t waste your valuable time with people who aren’t willing to take a rock-bottom price just to be done with the "situation" which they perceive as a major problem they want to be rid of.

2. Buying a property that has fundamental structural damage: If a house or building has foundation problems, it’s usually best just to pass on it. Not only is it very costly to repair, but can expose you to legal liability down the line. Unless you are a structural engineer or have a tremendous amount of experience with these matters, it’s best to just avoid properties with foundation or grading / drainage / flooding issues.

3. Not doing the math properly when estimating fixup costs: This is probably the most common mistakes newer investors make. If you underestimate the cost of repairs, you will overspend which will erode your profit margin. Until estimating costs becomes second nature, get bids from subcontractors before buying the house. Be thorough in your walkthrough, and assume everything will cost 10-15% more than you think, just to be safe.

4. Not checking for termites: Get a termite inspection early. Termites aren’t as easy to spot as you might think and could lead to serious problems causing a huge liability.

5. Hiring poor contractors: Other than general laborers who come in to clean or landscape, avoid hiring unlicensed contractors unless you are completely confident in their ability to perform and they have insurance to cover their work. There are a number of good licensed vendors out there that will work for a better-than-retail price. Sell them on the idea of repeat business and a long term relationship.

6. Not getting quotes from multiple subcontractors: For every repair, make sure you get multiple bids from subcontractors, and make sure you let them know that you are getting multiple quotes. When you have your lowest quote, go back to the others and ask them to beat it. The money you save here goes right to your bottom-line. On the other hand, don’t be so cheap that you anger or alienate every local subcontractor, as you need to build a team of subcontractors that you can rely on. Ask them lots of questions so you expand your understanding of repair alternatives and why repairs cost what they do. It may benefit you to create a list of repairs and what they cost so you can build a database for future reference.

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