Rehab and Rent Profit Model
Investing Long Term with Rehab & Rent
Build Long Term Wealth with Ugly Properties …Rehab and Produce Great Cash Flow
Use the Rehab and Rent Profit Model to purchase a property in fair or poor condition at a discounted value, then rehab it and rent or lease it to qualified tenants for cash flow. This strategy give you great benefits like, tax benefits and appreciation
What it Is Rehab & Rent and How Does it Work?
The Rehab and Rent Profit Model is perhaps one of my favorite of all the Profit Models. A Rehab and Rent occurs when you purchase a property from a distressed seller at a deeply discounted price, and then rehab it to make it suitable for a renter. Once the rehab is completed, you market the upgraded property to qualified tenants or lease option buyers and enjoy a strong equity position with positive cash flow and great long term appreciation.
The only other Profit Model that is similar to the Rehab & Rent is the Rehab & Flip. The difference is one is short term strategy versus a long term strategy. You must make the decision that’s best for you. The Rehab and Rent is a long term buy and hold strategy that can give you great cash flow today and long term appreciation for tomorrow.
Of course, with this strategy the risk is the highest of all the Profit Models, due to the cost, time and project management risk associated with rehabbing, and the long-term property management responsibilities of being a landlord.
Although it is not necessary, previous real estate and investment experience is a plus for this strategy. If you don’t have experience, don’t let that stop you, instead a good mentor will help keep you avoid trouble. If it were my money, I’d make previous experience with fixer-uppers or having a mentor a requirement.
Rest assured that if you’re actively pursuing real estate investment for profits, then you will be doing some rehab and rent deals. Of course, if you plan to purchase the property and own it personally, it is helpful to have some cash and/or credit to get the deal done. Also, being stuck trying to evict a non-paying and troublesome tenant can be a big hassle. Make sure you understand the landlord tenant laws in your state and have your rental/lease agreements prepared by or reviewed by a good real estate attorney. Another option would be to hire an experienced property manager to handle the tenants for you.
Rehab and Rent is a an excellent long-term, traditional investment vehicle for a handyman investor who can buy undervalued distressed properties at a discount, fix them up and hold them long term for the many benefits of equity appreciation, cash flow, loan reduction and tax benefits. All things considered, this is the traditional way to build long term wealth in real estate. Many of the other Profit Models generate cash, but not the long term equity potential and passive income possible with Rehab and Rent.
The biggest challenges with a Rehab and Rent are the money and time one must invest to acquire the property, get rehab estimates, hire and manage contractors, oversee the work, and paying carrying costs while the property is being worked on. This type of Profit Model requires some out of pocket cash to pay for rehab and property carrying costs. Once the property has been rehabbed and rented, the biggest challenge will be the ongoing management of the property including repairs, maintenance, maximizing rental income, occupancy and processing tenant evictions when they become necessary.