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How to Calculate Real Estate Rehab Profits
If you are investing in real estate you will face a variety of challenges. First you have to find the right property. Finding the right property is a combination of personal preferences and opportunities involved in a real estate deal. My most important real estate investment principle is; "You make money with real estate when you buy the property not when you sell it". This means that I wouldn't touch a rehab property where the purchase price is not below 65%-70% of the market value. Why do you need such a low price to make it work? This is quite simple. A common guideline among investors is that you must make at least $10,000 to make it worthwhile. Remember you're an investor and not a handyman. Rehab projects last typically 4-6 months, sometimes even longer. You don't want to end up making minimum wage as a handyman after the project is done. Quite frankly this is not uncommon for first time investors. Real estate investment is all about numbers. If the numbers are right you must make every mistake in the book to turn your project into a financial disaster. That's why you must buy the property as cheap as possible. Selling the property is your least problem. First you have to put together a budget. Here's a little example. Property A is located in a decent neighborhood with average home resale values of $150,000. That's what our property will appraise after the repairs are done. We also take out a hard money loan with 4 points and 12% (interest only) for 100% of the purchase price. We calculate that the property will sell for $150,000 in 6 months. There are about $10,000 in repairs you have to take care of. Property A Purchase Price $100,000 Purchase Closing Cost $8,000 (fees + 4 points) Holding Cost $6,000 (6 months of interest) Repair Cost $10,000 Insurance, Utilities $2,000 (you need a vacant property insurance which is more expensive) Selling Closing Cost $13,000 (6% realtor fee of $150,000 + closing cost) Total $139,000 Selling Price $150,000 Expenses -$139,000 Total Profit $11,000 This is just a very simple example, but I hope you get the picture. Keeping track of the numbers is essential in real estate investment. In the example above just imagine what happens if you spend more money for the repairs or you have to sell the property for less money. Even worst if you can't sell the property within 6 months and after 9 months you sell it for less money. Not only did you loose on the selling price you had 3 months of interest piling up as well. When you're investing in rehab properties you have to have an exit strategy. My exit strategy is, to rent the house and refinance the hard money loan if I can't sell the property after 6 months for the price I'm asking for. This will cover my monthly expenses and I have more time to sell the property when the market is better. Actually converting a rehab property into a rental can be a very profitable choice of real estate investment. Friends of mine are doing quite well with this strategy. Bottom-line; crunch the numbers, make a budget, keep track of your expenses and have an exit strategy. Having this in place you're good to go. Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Investor and a successful Internet business owner.Learn more about real estate investments at http://www.suncoastrenttoown.com or send a blank email to mailto:suncoastrenttoown@getresponse.com
MORE RESOURCES: Batman’s Office and Secret Bathrooms—These Real-Estate Agents Have Seen It All The Wall Street Journal Real estate deals, ‘high’ returns, 100 victims: Indian-origin ‘glam’ couple held for $4 million scam in US | World News - Hindustan Times Hindustan Times Real estate expert warns socialist mayoral candidate could trigger massive NYC exodus - Fox Business Office real estate wide open in Denver as vacancy rate hits 36 percent Colorado Public Radio Altadena’s rough real estate market: Slower sales, lower prices, lottery winner plucking up properties Los Angeles Times Erie County real estate transactions Buffalo News Real estate magazine reports Les Wexner as Blue Heron buyer The Martha's Vineyard Times 'Married to Real Estate' Stars Get Huge News after HGTV Cancellation Country Living Magazine NAR Real Estate Forecast Summit National Association of REALTORS® 20 Worst Housing Markets Facing Biggest Price Crash or Correction by 2026 Norada Real Estate Investments Residential lending shifts: Local credit unions gain ground, banks lose volume The Business Journals Real Estate agent speaks out as sheriff’s investigators search for missing foster mom fox5sandiego.com How Trump’s personal aesthetic is redefining White House décor: 'I picked it all myself' - USA Today Future of malls: Arizona's retail centers evolve as customers' habits change The Arizona Republic Central Mass. real estate transfers, Sunday, July 20 Worcester Telegram Neal Communities to celebrate Palmera at Wellen Park grand opening on July 25 Sarasota Herald-Tribune Don’t Skip This Moving Day Step: What to Clean Before Handing Over the Keys - Better Homes & Gardens Don’t Skip This Moving Day Step: What to Clean Before Handing Over the Keys Better Homes & Gardens Real Estate Property Transfers Spring Hill for June 23, 2025 Williamson Source I Tried Zillow’s New Aerial 3-D Search Tool, And I'm Obsessed Country Living Magazine Old Family Dollar demolished in Quincy Center. What will take its place? The Patriot Ledger Couple in California surrogate case also faces two lawsuits over real estate business practices NBC News New report documents that it's harder for Columbus and other Ohio residents to make rent The Columbus Dispatch International Buyers Purchased $56 Billion Worth of U.S. Homes from April '24 to March '25 National Association of REALTORS® Canadian psychologist Jordan Peterson sets up shop in the Valley, records show The Business Journals Real Estate Transfers ~ June 25, 2025 The Bedford Citizen Top Real Estate Stocks Fast Growth Stock Alerts - Explosive earnings growth Autocar Professional ‘Taken advantage of’: Real estate agent ripped off friends, church, and federal government - WSOC TV New Hampshire the latest state to ban right-to-list agreements Real Estate News by RealEstateNews.com July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing? 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Deed transfers in Ocala/Marion: May 19-25, 2025 - Ocala StarBanner Real estate agent goes viral with racy jokes, Trump impersonations Business Observer Top Stocks for Real Estate Investment Free Market Trend Analysis - High-profit stock alerts Autocar Professional Top Stocks for Real Estate Investment AI Stock Forecasts - Free Investment Case Studies Autocar Professional Bitcoin Is Draining The Value Out Of Real Estate Bitcoin Magazine Top Stocks for Real Estate Investment Free Market Trend Analysis - Lightning-fast capital gains PrintWeekIndia Founding Father John Hancock's home is on the real estate market in Boston. Take a look The Patriot Ledger Eric Adams Is Raking It in From Big Real Estate New York Magazine Real estate sales in Peoria, Tazewell and Woodford counties for July 19, 2025 Peoria Journal Star Best Real Estate Stocks Trusted Expert Guidance - Overwhelming financial success Autocar Professional Top Stocks for Real Estate Investment in India Premium Financial Forecasting Tools - Unmatched market performance PrintWeekIndia Top Real Estate Stocks Fast Growth Stock Alerts - Phenomenal capital gains Autocar Professional Mediterranean-style mansion in The Woodlands among priciest home sales week of July 6 (PHOTOS) The Business Journals Real Estate’s Big Gains From AI Morgan Stanley New Valley mansion near Billionaire's Row lists for $13.5M The Business Journals Best Real Estate Stocks Expert Backed Stock Investments - Superior portfolio returns Autocar Professional HGTV’s Egypt Sherrod Shares Cryptic Message After ‘Married to Real Estate’ Cancellation tvinsider.com Scammed, Shamed and Deepfaked: Real Estate Agents Speak Out on the $15M Crypto Con National Association of REALTORS® Best Real Estate Stocks Smart Trading Moves - Explosive earning power Autocar Professional Best Real Estate Stocks in India Low Risk Stock Investments - Superior portfolio returns Autocar Professional |
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