Perhaps the #1 factor that goes into making a profit or taking a loss is controlling your costs. Whether you are purchasing a nonperforming loan or a property to flip, it’s all about the math. Regardless of how well you rehab and present a property, you are still limited by the local market with respect to the amount you can sell the property for. Cost controls are essential for hitting your profit goals.
One of the biggest mistakes we see novice investors make is allowing their vendors to dictate costs and timelines. Keep in mind that many vendors are incented to drive up your costs by doing unneeded work on your properties. We too often see inflated budgets for unnecessary repairs. Servicers, foreclosure attorneys, contractors, and other vendors typically provide a menu of services. Upselling is a staple of any industry. Real Estate is no exception. Your ability to say no to a particular upgrade when it’s not warranted may be the difference between profit and loss.
Just because one of your vendors tell you that a certain action needs to occur doesn’t mean you shouldn’t ask appropriate questions before you open your checkbook. It has been our experience that many of the items that are recommended from our vendors are simply lining their pockets rather than adding value to our asset.