When to STOP Rehabbing | Success Path Education

By Tarek El Moussa

If you stay in the flipping business long enough, you’re going to run into a house that’s just a total flop. As much as you research the property, the neighborhood, and everything involved with finding great deals, statistically speaking, you’re going to have at least a couple of nightmares along the way. So, how can you tell when you’ve reached that point where you just can’t do anything more for a house? How do you know when to stop rehabbing?

What It Needs vs. Your Rehab Budget

Christina and I have found some houses that looked like real winners from the curb, but when we got inside we found structural damage and leaky ceilings that threatened to take up our whole rehab budget all by themselves. This can become a huge nightmare.

If you’re crafty, you can figure out just how much work you can do and how much you need the professionals to do, and you might be able to shave a few dollars off and stay within budget. The thing is, though, when you flip houses, if you waste a lot of time on a project that the pros can do really fast and a lot better, you might as well be throwing money down the drain. So, you have to really focus on how much time and energy you’re putting into a rehab that might really not be worth it.

Say “No” to Structural Damage Unless You Have “Deep Pockets”

Have your contractors taken a really good look at the whole house before you do anything to it. You don’t want to invest any time or any of your budget into a house that’s not worth rehabbing, so get a good inspection and know what you’re dealing with before you start rehabbing.

If there’s structural damage that’s going to take up your whole rehab budget, suddenly you have a lot of thinking to do. Take a look at what it will cost to get the house in living condition, and if it’s too much, it’s time to make a hard decision. You’ll either have to do the best you can with what you have, or you’ll have to demo and start over.

Do The Outside First and Get a “For Sale” Sign Up Fast

If there’s no significant structural damage but you’re still afraid that you’re going to run out of budget before you run out of rehab tasks, put those tasks in order of importance. The first rule of flipping is to get it looking good, get it on the market, and do it fast! Time is money when flipping a house, so you want the house to look great from the curb as soon as possible so you can get your “For Sale” sign out front.

Now, that doesn’t mean you should start showing the house while you still have contractors working on it. It just means you’re generating interest in the house while you’re working on how much rehab you can do.

How Much Will More Rehab Affect Your Market Value?

Finally, let’s talk about how much rehabbing you really have to do to flip houses. I’d never tell you to do poor quality work, but remember that you’re trying to get your house in the best shape for its market so that you can make the best profit margin possible. That’s the core principle when you flip houses. So, take a good, hard look at how your rehab projects inside and outside the house will bring it up to market value and get it sold as quickly as possible.

It’s called flipping for a reason: the sooner you can get a house in great shape (while staying under budget), the sooner you’ll see return on your investment and the sooner you’ll move on to the next flip. So, if that last little detail in the kitchen or the adorable garden out front won’t increase the house’s value, it’s time to stop rehabbing and start flipping.

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Tarek El Moussa

Tarek and Christina El Moussa have over a decade of professional real estate experience and have been featured in national print publications, online media outlets, and a popular real estate TV show. Tarek is known for his determination to get the job done and doing it right.