The Gut Rehab
By Steve Cook

When approaching the world of real estate rehabbing there are many different ways you can go.

Beginners in investing usually like light cosmetic rehabs. They’re sometimes referred to as a “shave and a hair cut” (interpreted as paint and carpet).

Others prefer regular cosmetic rehabs which usually amount to paint, carpet, and updating everything that you can see such as painting, flooring, exterior, cabinets, countertops, fixtures, tile, and more.

But the type of real estate rehab that seems to scare most people away is the gut rehab.

The gut rehab is not some new abdominal machine or an exercise program to remove that spare tire from around your waste (you all know that if I can master that one I’d be a gazillionaire).

The gut rehab is a complete and total rehab of a house. And this is the exactly type of real estate rehab that I prefer to do.

Why?

Well here are some benefits of actually doing one and some of the concerns that you may have which I hope to alleviate:

1. Gut rehabs are ideal for older or heavily damaged homes.
   The biggest fear that real estate investors have when getting into a rehab is whether or not they are missing something. “What if something comes up that I can’t see?”
   
   When doing a gut rehab, you take into consideration everything that can go wrong. One of my favorite sayings is “when you gut them, they are all the same.”
   
2. Many contractors like them better.
   Plumbers and electricians would much rather work in a home where the walls are out because it gives them easy access to the areas that they need to work in and speeds up their job time which lowers their price.
   
   Ask an electrician to rewire a house with the walls closed up, and they are likely to decline the job. If they take it, they’ll charge you a fortune and, in the end, you can’t tell if they did a good job or not because you can’t see their work.
   
3. Your end product ends up like new.
   When doing a gut rehab, everything in the house is new with the exception of the actual framed structure itself.
   
   My homes look like brand new when I’m finished with them. They are very appealing to the buyer who would like to buy a new house, but simply cannot afford one. They are typically bigger then new homes for the same price as well.
   
4. They are easy to sell.
   Because of the newness, these houses sell easily and typically for top dollar. People are willing to pay for quality, and its likely a trend that will never go away.
   
5. Less competition to acquire the gut rehab because most real estate investors are pursuing cosmetic ones.
   Truthfully, my own market (Baltimore area) has evolved in recent years so that this isn’t always true anymore. Many investors in my area are now in the gut rehab mode. But in many other areas, this still rings true.
   
   Many people ask how I buy my houses so cheap and the gut rehab is one of the reasons why. I’m buying homes that most others won’t touch. Believe me when I tell you that the many of the homes that I buy are very ugly when I get them. Most investors run from them. I could take my very ugly house and the comparable home next door which is in relatively good shape, gut them both, and they would both look the same. They would cost the same to gut and put back together. So by gutting a home, they are all on the same playing field.
   
6. Easy to estimate your rehab.
   When dealing with newer homes that have modern electricity and plumbing, much of the unknown is eliminated. You know that at worst you may have to do some plumbing and electrical repairs, but redoing these entire systems is very unlikely.

When I refer to newer homes in this sense, I’m referring to most homes built after 1950. However, when you are dealing with older homes, you may wonder if you need to repair or replace the plumbing and electrical.

When doing a gut rehab, it’s a given, you are going to tear it all out and put in new. Because you are redoing everything, it gets very easy to estimate your rehabs. If you are doing similar type homes, you simply remember what the expenses were for the last home you did and apply that to the next one.

This is just a brief overview of a gut rehab and its benefits. Hopefully it opens your eyes to the possibilities. For additional help, try one of our real estate investing products offered online.