Since my previous post addresses the financial costs associated with renovating an investment property, allow me to focus on another important consideration: The time factor.
In this situation, there are many repairs that, while not costly in terms of pricing, take a lot of time to finish. In the course of those repairs, markets can change rapidly. Here the four things that can cost you if you are not on top of your timing:
No. 1 — Interest rates can spike
No. 2 — Mortgage restrictions may tighten
No. 3– Seasonal conditions can lower the number of prospective buyers
No. 4 — A property may not be ready to be listed or shown
By that standard, time is money – a lot of money – because, unless you can approximate how long certain renovations will take to get done, you may be the prisoner of time as days become weeks, which turn into months and ruin any chance to turn a profit.
And, unless you have a trusted group of workers who can give you this information before you make a purchase, the least costly (with regard to materials) fixes can still put you in a financial fix.
For example: An electrician may recommend that a room be rewired or existing systems be updated, which, when filed under an investor’s “To-Do” list, does not represent a major expense. But, if that same electrician says the cost consideration is not a principal factor – though the delicacy of the operation is the more important variable – then you need to ask that person a critical question: How long will this project take, from start to finish?
If an electrician or carpenter or roofer cannot answer that query, or “I do not know” is the only reasonable response, my suggestion is to proceed with extreme caution. Remember, the more unknowns that govern a potential investment property are a warning to look elsewhere for other opportunities.
As I mention in this broadcast, experience teaches me that due diligence (down to the most minute detail) is necessary before making a bid for a property, or tabulating (in your head) how quickly you can ready that home for sale.
Put aside the big ticket items, the things we already know can reduce or erase any chance to earn a profit, like: Installing a new roof, gutting and replacing plumbing, spotting a cracked (and worsening) foundation, redoing a kitchen, as well as removing termite-damaged flooring or repainting the exterior of a home.
Those points are the proverbial “tells” from an investor’s unwritten handbook; they are often easy to identify, and just as straightforward to cost estimate.
In contrast, a gardening crew hired to replant grass and beautify a lawn with shrubs, and flowers and bushes can upend the earth – literally – and, in the interim, leave you with (and in, financially) a ditch. Each day, as you wait for sod to be delivered and trees to take root, your time translates into lost money and missed chances to execute a sale.
To repeat: Always ask each person involved in a renovation how long his or her respective tasks will take to complete.
Also, watch the time by watching the calendar. That is, do not become a prisoner of one season – a harsh winter or a tornado-plagued summer – that will make you the victim of another part of the year.
Do not, in short, sacrifice your prime opportunity to sell a home . . . because renovations are incomplete, expenses continue to accrue and you suffer the fallout, emotionally and economically.
Again, time the repairs to coincide with the selling season in your particular section of the country. Translation: Give yourself enough flexibility, so the finished product – the home itself – is, in fact, finished.
Timing is, well, everything.