Rehabbing (or renovating) a property is probably the oldest and most well known real estate investment strategy. Buying a junky property for a low price, fixing it up, and then selling it is a tried and true method for making a very nice profit!

You would think, at first, that this method would require both money and the ability to swing a hammer without bashing your thumb, but it doesn’t! In the next few paragraphs you will see that neither your pocketbook nor your thumb will need to be damaged in order to succeed as a rehabber.

So how does a rehabber go about making money? The key is to plan ahead - you make your money before you ever buy a property. What this means is that you have all your numbers crunched and all your plans finalized before approaching a seller with an offer.

Those fix and flip T.V. shows got you interested? See how real people are making real money rehabbing properties and selling them for huge profits - learn from a guy who made himself rich doing what he teaches!

The first step is knowing what the house will sell for once it’s in a fixed up condition. For this you need to find comparable listings, or comps, many of which can be found online or via a real estate agent. These comps will show you what similar homes have sold for in the past few months. You then need to conduct an inspection of the house to determine just how much work needs to be done. You’re trying to stay away from big problems, such as a cracked foundation, as these can really soak up your cash. Kevin Meyer’s book, mentioned above, has a fantastic list of things to look for in a fixer-upper property.

Armed with these numbers, and the amount of profit you want to make, you can now come up with an offer for the seller. Of course, ideally you want all this leg work done for you ahead of time, and that’s where a flipper comes in - read all about them in the Flipping Real Estate section of this site.

In fact, the example listed on that page almost entirely reflects what you as the rehabber need to do in order to come up with an offer, with the exception of counting in the flipper’s fee. In the following example you’ll learn what to do after you’ve got an agreement to buy a fixer-upper house:

The house you’ve secured is an awful looking 3 bedroom, 2 bath house in a nice part of town. In fact, it stands out like a sore thumb. Other homes in the area regularly sell for $100,000, and you’ve managed to grab this one at $60,000.

You’ve determined that it’s going to cost roughly $15,000 to repair the house, and that includes the labor cost of the handyman you’ve hired to do all the work. That brings the total amount of money you need to buy this house and repair it to $75,000. Where are you going to find that kind of money?The secret here is to use hard money lenders.

Hard money lenders are different from banks in that they tend to be individuals who are looking for a quick return on their investment, so the invest in sound real estate projects. Hard money lenders can be found in the paper or online, or via real estate agents or mortgage brokers.

You find a local lender who’s willing to lend you 75% of the after repair value of the house. That’s perfect for you in this case because 75% of $100,000 is $75,000!Closing occurs a short time later, where you pay the seller $60,000 for the house. Work begins immediately to renovate the house, and you set to work advertising the home. You can do this as a for sale by owner to save some money, or you can go completely hands off and let a realtor take care of it.

Three weeks later the handyman has the work done, and it looks great. Your real estate agent has several people who are interested in looking at the property, and after a couple showings you have an offer for $100,000. That leaves you with $25,000 profit, out of which you pay the hard money lender a small fee for lending you the money, leaving you with well over $20,000. Not bad for less than a month’s “work”!

Again, don’t forget to check out Fixer Upper Fortunes. Sal’s been rehabbing properties for 10 years now, and has become extremely wealthy doing so. He’s put all of his secrets and tips into this downloadable e-book, and he’s put it up for sale for an insanely low price, but I’m not sure how long it’ll stay that way.