You Can Sell A Property Without Completing Renovations

By Lloyd Segal, Director
Los Angeles Real Estate Investors Club, LLC

Actually there are several exit strategies available to you that would avoid completing renovations. For example, you could flip the property “as is” without performing any repairs or renovations whatsoever. Or, you could complete only the repairs that are absolutely necessary and then sell the property. Or, finally, you could completely rehab the house and then flip it. Let’s explore each of these strategies separately.

1. Wholesaling.

If you enjoy the hunt for properties and are good at negotiating deals, you can make money without doing any repairs or renovations at all. Using this exit strategy, you simply track down a property, put it under contract, and then turn around and sell the contract (“assign”) to another investor for a profit. Once you establish yourself as a having contracts to flip, you’ll have a ready source of flippers eager in taking wholesale properties off your hands. And, you’ll spend very little, if any, of your own cash!

The process of finding properties and quickly reselling them to other flippers is called “wholesaling.” The advantages of wholesaling are simple: 1) You don’t have to spend time and money performing rehabbing the property; 2) you’ll make money finding great deals for other flippers. The only disadvantages are that: 1) you won’t make as much money on each deal, and 2) you could find yourself owning a house that you can’t find a flipper to buy.

2. Repairs Only.

In the alternative, you could make only the repairs that are absolutely necessary. But then, before you begin renovating the house, you could flip it to another investor. For example, you find a property in desperate need of cosmetic repairs: paint, carpet, and landscaping. It could also benefit from major renovations, but you don’t have the funds. It’s the smallest house in the neighborhood, and if you built an addition (i.e. another bedroom and bathroom) you could bring its value in line with the other houses and make a handsome profit when you flip it. The problem is that you only have $15,000 to spend, and you need to flip the house quickly before the holding costs overwhelm you.

In this situation, your best exit strategy might be to invest $10,000 in carpet, paint, and basic landscaping, saving $5,000 for holding costs (or contingencies). Then, when you show the house to an investor, he will see the potential in the property and pay you a premium as a result. In this way, you may be able to double or even triple your $10,000 repair investment.

3. Partial Rehab.

When doing a quick “down-and-dirty” rehab on a property, you’re not transforming it into a showcase home to sell to consumers. Instead, your goal should be to transform the home into a clean, investment property that would appeal to other investors. This means only replacing old or damaged carpet, painting the interior with neutral colors, thoroughly cleaning the entire house, sprucing-up the landscaping, and replacing light fixtures.

Flipping before all of the renovations are completed may reduce your profits, but it will also save you time and keep your investment costs low. In fact, if you have little cash to invest, this might be your only strategy to profit on the deal. Later, when you’ve built-up your investment funds, you will have more exit strategies to choose from.

At this point, you may be asking yourself, where do I find these investors? You can find investors by placing classified ads in your local newspaper. You can also find them by attending local real estate investment clubs. There is no shortage of investors looking to buy investment properties. Often these people don’t know how to find deals or aren’t willing to do the work necessary to find them. Some are part-time investors who hold full-time jobs. Others are brand new. They have cash to invest and resources to rehab a property. Some want to flip the property, while others are looking for long-term rental properties. Regardless, these investors don’t have time to find properties, evaluate opportunities, negotiate deals, or rehab properties. But you do, so take advantage of it!

The good news for you is that there are always investors looking to buy properties before, during, and after renovations.