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By: Stephen Cook
When approaching the world of real estate rehabbing
there are many different ways you can go. Beginners
in investing usually like light cosmetic rehabs. They’re
sometimes referred to as a “shave and a hair cut” (interpreted
as paint and carpet).
Others prefer regular cosmetic rehabs which usually
amount to paint, carpet, and updating everything that
you can see such as painting, flooring, exterior, cabinets,
countertops, fixtures, tile, and more. But the type
of real estate rehab that seems to scare most people
away is the gut rehab. The gut rehab is not some new
abdominal machine or an exercise program to remove that
spare tire from around your waste (you all know that
if I can master that one I’d be a gazillionaire). The
gut rehab is a complete and total rehab of a house.
And this is the exactly type of real estate rehab that
I prefer to do. Why? Well here are some benefits of
actually doing one and some of the concerns that you
may have which I hope to alleviate:
- Gut rehabs are ideal for older or heavily damaged
homes. The biggest fear that real estate investors
have when getting into a rehab is whether or not they
are missing something. “What if something comes up
that I can’t see?” When doing a gut rehab, you take
into consideration everything that can go wrong. One
of my favorite sayings is “when you gut them, they
are all the same.”
- Many contractors like them better. Plumbers
and electricians would much rather work in a home
where the walls are out because it gives them easy
access to the areas that they need to work in and
speeds up their job time which lowers their price.
Ask an electrician to rewire a house with the walls
closed up, and they are likely to decline the job.
If they take it, they’ll charge you a fortune and,
in the end, you can’t tell if they did a good job
or not because you can’t see their work.
- Your end product ends up like new. When doing
a gut rehab, everything in the house is new with the
exception of the actual framed structure itself. My
homes look like brand new when I’m finished with them.
They are very appealing to the buyer who would like
to buy a new house, but simply cannot afford one.
They are typically bigger then new homes for the same
price as well.
- They are easy to sell. Because of the newness,
these houses sell easily and typically for top dollar.
People are willing to pay for quality, and its likely
a trend that will never go away.
- Less competition to acquire the gut rehab because
most real estate investors are pursuing cosmetic ones.
Truthfully, my own market (Baltimore area) has
evolved in recent years so that this isn’t always
true anymore. Many investors in my area are now in
the gut rehab mode. But in many other areas, this
still rings true. Many people ask how I buy my houses
so cheap and the gut rehab is one of the reasons why.
I’m buying homes that most others won’t touch. Believe
me when I tell you that the many of the homes that
I buy are very ugly when I get them. Most investors
run from them. I could take my very ugly house and
the comparable home next door which is in relatively
good shape, gut them both, and they would both look
the same. They would cost the same to gut and put
back together. So by gutting a home, they are all
on the same playing field.
- Easy to estimate your rehab. When dealing
with newer homes that have modern electricity and
plumbing, much of the unknown is eliminated. You know
that at worst you may have to do some plumbing and
electrical repairs, but redoing these entire systems
is very unlikely. When I refer to newer homes in this
sense, I’m referring to most homes built after 1950.
However, when you are dealing with older homes, you
may wonder if you need to repair or replace the plumbing
and electrical. When doing a gut rehab, it’s a given,
you are going to tear it all out and put in new. Because
you are redoing everything, it gets very easy to estimate
your rehabs. If you are doing similar type homes,
you simply remember what the expenses were for the
last home you did and apply that to the next one.
This is just a brief overview of a gut rehab and its
benefits. Hopefully it opens your eyes to the possibilities.
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About the Author: Steve Cook
Since 1998 Steve Cook has flipped hundreds of
houses as an active Baltimore-area real estate
investor. Steve’s unique specialty is the “flipping
homes 1-2 punch”, a proven system of real estate
investing that powerfully combines wholesaling
and rehabbing
houses. Also the founder of www.FlippingHomes.com,
Steve is dedicated to helping others in this thriving
online community succeed through understanding
and aggressively applying his time-tested, step-by-step
approach to flipping
real estate.
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