Many investors specialize in picking up run-down properties and renovating them for sale or lease. Profit can also be made in acquiring properties that offer extra land. It is sometimes possible to not only get your money back, but also make a profit on the sale of a remodeled house with a reduced amount of land (assuming the local zoning ordinances will so allow), while holding the additional land for long-term appreciation or building another house or small apartment on it. In addition, many larger houses that might otherwise be considered uneconomical can be trimmed down to accommodate a family seeking more spacious quarters. By reducing the structure’s surplus space, many sprawling houses can be made salable. It is also possible to buy a large house, remodel it to a duplex or more units (with zoning approval) and sell it with a good profit.
Low Front-Money Requirements. Less front money is required for many rehabilitation jobs than for comparable new construction, since the building shell is valuable and less material is required.
Maximum Use Of Work Crews. If the investor is a builder, he can buy or option buildings and start working on them during slack construction periods. In this way, he keeps construction crews busy for the maximum amount of time.
Cash Flow. A rehabilitated building can bring the investor a steady rental income providing cash flow and profits with tax shelter produced by depreciation deductions.
Quick Action. As the rehabber gains experience, a builder can complete work on an older building in less time than it takes to put up a comparable building from scratch. Usually, a rehabilitated building will produce more rentable space than a similar new structure because of modern building code requirements.
A Rental Portfolio. A portfolio of rehabilitated houses and apartments should produce a relatively high rate of return with only a limited risk. As they appreciate in value, periodic refinancing of the buildings is possible. In this way, the investor can cash out part of the equity tax-free. Also, refinancing can produce substantial funds for new construction and rehabilitation projects. Later, when the buildings are sold, the gain will be taxed at favorable capital gains rates.
After the purchase, continue with the most professional actions by employing a professional real estate management company.