What If I Run Out Of Money Doing A Rehab?
Q: Gerald, I’m doing my first rehab and it’s costing me more money than I initially thought. What should I do if I run out of money in the middle of the rehab? Sunny, Garwood, NJ
A: Sunny, rehabs normally end up costing more money than you initially expect, which is why it’s always a good idea to build in a cushion when you do your planning for cost overages. In your case, since you’re already in the middle of rehabbing, the best thing to do is take an honest look at all the additional renovations that you were planning to do and prioritize them. In other words, determine the most important items that need to be repaired or replaced to make your property marketable and appealing to an end buyer or investor. You should also try to reduce your rehab costs. For example, if you’d initially planned to install marble countertops, you should consider a cheaper alternative like formica or tile.
The other thing I would suggest you do is immediately try marketing your property in its current state to other investors that may be able to finish doing the rehab if you run out of money. You may be able to flip the property to another investor or convince another investor to partner with you and put up the rest of the money required to finish the renovation.
Thanks for your question, Sunny, good luck!
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