When Should I Rehab A Property And Sell It For Profit?

So you’ve found a great real estate deal and a motivated seller ready to hand you the keys at closing. At this point, you may debate whether to wholesale the deal to another investor buyer for quick cash or to rehab the property yourself, which will obviously take longer but should yield a larger profit. To help you make up your mind, I’ll help to point out the key differences between the two and the pros and cons of each decision.

Let’s get started!

Wholesale

There are only a few times when wholesaling is definitely the way to go: When you need quick cash, when you’re tired of doing rehabs, and when you don’t have the funds for acquisition, repairs, and holding costs. Frankly, sometimes we like to over-complicate things that really are simple.

Overall, wholesaling is the way to go if you’re shaking your head “yes” to one or more of these above reasons to wholesale. Even though wholesaling is a great option to make quick money, you still need to understand the process and the pros and cons. I’ve broken it down for you below.

Pros of Wholesaling

Cons of Wholesaling

A quick tip: If you think your deal is located in an area where it would make a better rental than a rehab flip to a homeowner, consider selling the property to a landlord looking for cash flow rather than maximizing the ARV (After Repair Value).

Rehab

Rehabbing a property requires significantly more finesse and operational expertise. You are essentially taking what other people don’t want and creating something they highly desire. This can be really cool if you’re in the position to make it happen and if it fits your investment strategy. Check out some of these reasons below and see if it’s the right move for you.

Completing improvements will immediately force your investment property’s value to increase exponentially, and thus making it easier to sell. But, rehabbing is not just an exit strategy, it’s a business!

You make money by doing your research, developing a detailed rehab budget and operation plan, and managing the process. You need to know your market, repair costs, exit price, and be able to tackle problems that arise during the journey. You should purchase your target far enough below ARV to make sure you have plenty of room for contingencies and a reasonable profit for your efforts.

Everyone likes formulas, so here’s my formula to buy a rehab deal in a hot market:

Purchase Price = (60–65% x ARV) — Cost of Repairs.

Then, you need to complete repairs and sell FAST. Like anything else there are pros and cons to the rehabbing strategy. Let’s review a few!

Pros of Rehabbing

Cons of Rehabbing

The Bottom Line

Like most things in life, there is no magic answer to rehabbing vs. wholesaling real estate. It all depends on your long and short-term goals and your market-specific strategy. There are, however, some things that can point you in the right direction.

Are you looking for quick cash? Wholesale.

Do you have time and resources on your hands? Definitely rehab.

Decide what’s going to work for you and then get out there and do it because I can assure you there’s no profit to be made sitting on your couch and watching your favorite flipping show on TV.

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I help companies grow faster. Seen on Forbes, Inc, & HuffPo. www.abhigolhar.com