Every real estate investor has to deal with finding the right balance between time and money during their deal. Every deal is different, and, as an investor, you will always have to make decisions that will ultimately alter the timeline or budget of the project. Keeping both your time frame and budget within your goals can certainly be a challenge. But also remember that while it may seem like you are saving time and money in the present time, there could be hidden costs down the line.
Here are a couple things to think about when it comes to considering whether or not you should attempt to alter your budget and/or timeline:
Shortcuts
During a rehab, it can be tempting to take short cuts to try to save both time and money. These short cuts could include neglecting to pull building permits, electrical permits, or plumbing permits, not adding insulation, and opting to use materials that are cheaper than the code requires. If this is how you choose to balance your time and money, you must decide if it is worth the risk. We’ve been in the business for more than a decade, and more often than not, this sort of plan backfires on the investor. You could think that what you’re doing is saving you money, but in reality, it’s really costing you more in the long run. If the homeowner discovers an issue down the line because something was not done to code, you will then have to spend more money to either fix the issue or face the possibility of being sued. At WCP, we always encourage investors to go about their deal in an ethical way that, in the long run, will end up saving both time and money.
Scope of Work
Another way to figure out a good balance between your time and capital as an investor is to decide whether or not you want a smaller renovation and, in return, a faster turnaround time. While this may seem to be an attractive option, remember that the quick time frame and smaller budget will have an effect on the ARV. The less time and money you spend on a project, the smaller the price will be when you sell. However, these smaller projects also tend to come with less room for error since the scope is much smaller than a complete rebuild.
We at Washington Capital Partners have advised numerous investors on hundreds of deals over the past decade. Do you have questions about the process? Are you looking to being an investing career? Are you new to the area? Or do you simply want a second opinion on a property? We can help! Reach out to us today.