We get inside a lot of foreclosed properties every month and it never fails to amaze us just how many are “half completed rehabs”! We’re not sure, but we wonder if there are maybe just a few too many rehab “reality” show that are not quite … well … REAL! We do think it is entertaining to watch rehab shows. Before and after shots are totally cool and honestly we have seen some very interesting and creative ideas. But we’re still inclined to put them in the “entertainment” category, rather than the “this is how to really do it right” category. With the plethora of distressed properties on the market today the opportunities are definitely there as never before for those who know how to rehab successfully. Here are six fundamental things you need to know if you want to be successful at rehabbing:

1. You must buy at a “deal” price!
When we look for properties for our rehab clients, we look at properties that are priced at least 30% below typical comparables in the immediate neighborhood - absolutely no less than 30% under the local area! Of course it depends on how much work a property needs. We’ve helped our clients buy properties for as little as 10% to 20% of nearby comparables. (Pictures are examples of properties like this that Realty Dynamics has sold)

Want a “deal”? Remember you have to buy it right to have enough “room” to do the rehab and end up with a profit. Watch the market every day and be ready to act fast! The “Daily Dozen” and “Train Wrecks” are great resources on our website to help you find properties in the metro Milwaukee area.


2. Buy a property that matches your skill level
If you have extensive contracting experience, bad basement walls, a nasty roof or a structural issue or two might not be a big deal for you. Lots of people are afraid of properties with “big” issues – so prices sometimes can be really good and you’ll find a lot less other people interested. A little less competition is a good thing!

Mold makes you panic? Then don’t buy a property with “hair”, “fuzz” or anything that resembles a mushroom growing out of the carpet - ’nuff said! But if you’re a pro, you might just want to take another look, because many times mold can be completely mitigated - often at a price that might surprise you and even sometimes with a guarantee from a qualified contractor!

If though, your skills don’t go much past cleaning, painting and a little landscaping, then look for a “dated” property that is in overall good condition. With a bit of patience and determination you will find a property that is right for you!


3. Carrying Costs Can Be Hazardous to Your Wallet!
Beware of “estimated cost to complete” pitfalls that have derailed many a rehab project and took out the rehabber along with it! Everyone know that the total cost estimate, must include all of the following:

1. Original purchase price
2. Closing costs
3. Labor and material costs to rehab
4. Final selling costs – sales commission and/or advertising … and don’t forget the transfer tax and title insurance

That is unfortunately the “quick list” that too many “never did a rehab” rehabbers come up with. It usually bares little or no relationship to the actual final cost for two reasons. First, some inexperienced rehabbers do not fully and correctly estimate how much the “labor and materials” piece will be. Then secondly is a poor, incomplete or “I didn’t think that was important” approach to estimating the carrying cost component of a project. Here’s a checklist to help insure that you’re estimating the carrying costs for your project correctly:

5. Property taxes for each month between the date your buy a property and the date you sell it. If the property is in a subdivision check to see if there are annual dues. If so your pro rata share will add to your costs.
6. Utilities You will likely need gas, electric and/or water for the rehab, but even if you don’t there are usually base monthly charges. Also if you’re buying a bank owned property, some utilities might have been turned off and you may have to pay reconnection fees.
7. The cost of interest on the mortgage you have or interest foregone on your money if you’ll be buying with cash.
8. Permits that are needed, if any, to properly complete the rehab
9. The cost to insure the property during the time you own it
10. The cost to maintain the property during your ownership – grass cutting and yard maintenance and/or snow removal


4. Don’t Over-rehab!
- Granite countertops and top of the line stainless steel appliances in a 2 bedroom, 1 bath house, just a little bit bigger than a postage stamp …
- All new maga-size evergreen shrubs and new super size trees in both the front and back yard and the waterfall and river just like on TV …
- Top of the line whirlpool tub in a basement bathroom?
Get a grip! Take a deep breath! Find your center!
Make a rehab fit the house and (probably even more importantly) make it fit the neighborhood.


5. Turn and Burn!
Buy it, fix it up and sell it fast! Get it? The shorter the time between the date you buy and the date your sell, the lower the carrying costs and the harder you make your money work for you. So, how do you turn and burn?

1. Make an aggressive rehab plan and stick to it - As soon as your offer is accepted, your charge is to carefully figure out what needs to be done, in what order it must be done, to what extent you can overlap tasks and how fast can it can be done. Do like the best construction contractors do: plan, create a schedule and work hard to beat it, every step of the way. If you can “play” the rehab project in your mind like a movie before you begin, you’re on your way to success! Be proactive and anticipate problems so that they can be avoided or at least handled efficiently.

2. Start marketing your property for sale as early as possible – don’t wait until the last detail is done. Start marketing when people can see what has been done and what you’ll be finishing up soon.

3. Offer a great deal – Want to sell fast? Its much better to sell at 10% below the market in 30 days than to hold out for a full market price that might take 5 to 6 months.


6. Manage Your Cash
Just because your sure your project will turn a profit, doesn’t necessarily mean that you might not run into a cash crunch somewhere along the way. Following points 1 through 5 won’t save your rehab if your run out of cash! Anticipate your cash outflow and then plan accordingly just like you’ve planned your work schedule. That way you’ll be certain that you’ll have the funds you need at every step along the way.


Remember “Buy a Deal – Give a Deal!” Buy a property that fits your skills and carefully estimate all costs. Plan your rehab project - don’t just “get started”. Do a balanced rehab that’s right for the property and fits the neighborhood and finally, get it done and get it sold as quickly as possible. Above all, manage your cash proactively. This market is providing great opportunities. Do it right and you too can enjoy the rewards of rehabbing.

Rehab for Rehabbers - Don’t go it alone! There is Help! Call Realty Dynamics (262) 224-5649 Copyright © 2010 Gohlke & Associates, LLC - All rights reserved

We previewed a wholesale property a while ago that we found very interesting. Its a 1950’s two story colonial. Overall in pretty fair condition, but another example of a rehab gone bad. The rehaber was trying to bring in today’s more popular open concept design to the first floor living area. First impression - unique and very interesting! But there were a few things that raised our eyebrows.

Opening up a load bearing wall was the key to creating a new open space. But, guess what? - not an ounce of understanding that if the 2nd floor would no longer be supported by the wall, it would have to be supported by something!

Here’s what’s cool! We found out that, at least in this case, if you take out the load bearing wall of a house, it does not necessarily mean eminent collapse! We always wondered about that! In fact, this place was looking pretty good - just a few small crack in the drywall!

We always thought that if you cut out a load bearing wall you’d better run for your life! So we did learn something here - sometimes the house comes down immediately - sometimes it needs a year or two!

Then we looked in the basement and realized that to create the open concept, the rehaber decided that the 1st floor half bath was in the way too! So that ended up in the dumpster along with the wall! We know that in this neighborhood a 1-1/2 bath home sell for $13K - $14K more than a one bath home. Oops!

This rehaber was pretty fortunate, all things considered. The second floor is still up there and the problem can be fixed. We’re pretty sure the 1/2 bath needs to go back in too, but - well, at least it will be new!

We love to work with rehabers.

We’d like to see you add value – not subtract it!

We can be your resource, your partner or both. We’re pretty sure the point of rehabing is to add value and profit from it. Call us if you agree!

Have a question about a wall - not sure if it’s load bearing or not?  We can help; just send us a comment and we’ll get back to you.

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

Our rock solid analytical tools and methods are second to none!

Distressed Property Inspection and Cost Estimator - with 350+ inspection points, you can be sure we know what needs attention and how much it will cost. Partner with us or purchase and rehab on your own - we can give you confidence in the financial reward potential of your properties.

Investment Property Analyzer – a scenario based analytical tool that illustrates a property’s financial dynamics, helping to determine its viability and optimum purchase price and terms; great for both income and rehab properties

Appreciation Calendar – property value change from any year to any other year (1995 to present)

Investment Property Values to Interest Rates Chart – How the present interest rates affect the value of properties you want to buy or sell

Real Estate Investment Counseling – unique counseling for our buyer clients not provided by many other realtors or offered on a fee basis as an independant, professional unbiased third party in decision making.

We are looking for rehabers. We have expertise to:

- Find the best properties to rehab
- Analyze the financial dynamics
- Assist you with scoping and costing work
- Market and sell properties quickly

Call and learn about our services.

You might be surprised at the opportunities! Click here to see just a sampling of the opportunities right here, right now!

We look at a lot of pre-foreclosure and REO properties every week - maybe 5; maybe even 10 or 12! We walk through them so we can help our buyers and investors when they call us with their inquires. We do it because we want to advice our clients as best we can on the condition of each property.

We list foreclosure properties too like more and more realtors these days. We’ve never failed to be amazed at how most foreclosed (REO) property listings have a single photo, the standard “As Is” phrase, a word about proof of funds and maybe an “allow 2 business days for response” - beyond that, not a word! It’s being sold “As Is”.

Four basement walls caving in? Roof that has leaked enough water to sink the Titanic, frozen/broken pipes, building leans 3 inches to the south!! - not to worry, no need to mention it!! - the property is being sole “As Is” !!

When we list an REO, we publish as many photos as we do for our regular listed properties and, we also include the “As Is” clause in our MLS listings. But we make note of any significant readily observable items - whether attractive selling features or easily observable defects - Huh! - we thought we learned in Real Estate 101 that the State of Wisconsin requires us to do that!

We applaud the Greater Milwaukee Association of Realtors (GMAR) for their recent web posting of a friendly reminder to all realtors that the “As Is” clause, does not mean they do not have to disclose readily observable “blatant adverse facts”. We think some of our peers need to step it up and uphold their obligations under Wisconsin law. We also think that foreclosed properties deserve the same “best effort” as we give to all of our other listings.

Thanks, GMAR, for reminding us all of Wis. Admin. Code RL24.07!

Click here to learn more about our Specialty REO Services

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

We enjoy watching many of the programs that show people rehabbing houses and then selling them for mega-profits! We think its entertaining! It’s even cooler when they complete their projects in 5 days or less! Why are they always under such ridiculous deadlines anyways? Maybe the producers have a vested interest in companies that make blood pressure meds, do you think? Maybe its just good TV! What do we know!

With our experience in construction we know that a project that require 100 man-hours of work can easily be completed in an hour with 100 men!! Right? Oh, and we love the open houses with 37 people that bring 6 offers, the least of which is $24K over the asking price! It’s reality TV! (on steroids or something!)

It makes good TV; but not necessarily good sense … and we’re pretty sure its not ‘reality’! Sadly, we never fail to be amazed at the number of foreclosed properties we see every week that are half completed rehabs. We’d bet that some of these are born out of “Reality TV” - but who could prove it?

This kind of reality TV is not a lot like the real world from our point of view. We know there are a lot of great opportunities in the real estate market today, but we hate to see people who bought the easy profits that some TV shows would have us all believing.

We’ve thought about getting into television too - “Flip Flops” is kind of catchy, don’t you think? But we’re guessing the TV execs would say its too negative!

We’re thinking that maybe we should just stick with what we know - how to help investors and rehabbers to take advantage of “real” opportunities and walk away with real profits.