The goal of purchasing, rehabbing and repositioning a property is to make a profit, period. That means every decision you make must have the bottom line in mind. That is especially important when it comes to deciding about the level of renovation required to reposition the property. Over the years I’ve been involved in everything from complete gutting with room reconfigurations to simple, quick, cosmetic clean-ups. There are valid reasons to go in one direction or the other.

1. COSMETIC VS
COMPLETE REHABBING:
MICHAEL ZARANSKY
THE CASE FOR EACH

2. THE GOAL:
OVERVIEW
The goal of purchasing, rehabbing and
repositioning a property is to make a profit,
period. That means every decision you make
must have the bottom line in mind.
That is especially important when it comes to
deciding about the level of renovation
required to reposition the property. Over the
years I’ve been involved in everything from
complete gutting with room reconfigurations
to simple, quick, cosmetic clean-ups.
There are valid reasons to go in one direction
or the other.

3. Here are a few things to think
about as you crunch the
numbers.

4. CRUNCHING NUMBERS
PHYSICALLY
ENHANCE THE
PROPERTY
Whether flipping a single-family home or
repositioning a commercial property, one
thing must be kept in mind, above all else: It is
essential to physically enhance the property to
make the place more desirable, and thus more
valuable.

5. CRUNCHING NUMBERS
MASTER THE
CONSTRUCTION
BUSINESS
As listed in my 2007 book, Purchase, Rehab,
and Reposition Commercial Investment
Property, you must master the construction
business, either by becoming your own
general contractor or hiring one. I fill the
latter role on mid-size projects — and thus
maximize profits — but use a third-party
contractor on bigger jobs.

6. CRUNCHING NUMBERS
"HOT"
NEIGHBORHOODS
Try to spot “hot” urban neighborhoods. While
the characteristics of such a place can vary
from one city to the next, the common threads
are the availability of public transportation and
local retailers. My own personal, unscientific
barometer is something I call the “Starbucks
Factor” — if the highly successful coffee chain
has set up shop in a given neighborhood,
that’s a sure sign the area is about to take off.

7. FINALLY,
maximize your net operating
income and cash flow.
CRUNCHING NUMBERS

8. Complete rehabs of single-family
homes can be extremely profitable,
and there is a growing market, especially in urban
neighborhoods, for fully restored vintage homes. That said,
there are drawbacks. The cost and time commitments are far
greater than that of a cosmetic rehab. Using a third-party
general contractor is a necessity.

9. WHAT TO ASK?
One of the first questions to ask yourself when examining
a property, the Los Angeles Times reports, is this:
Making that determination involves not just the work of
an inspector, but your own detective skills. Look around.
Really look. Open every closet. Turn on every light, and
every faucet. Understand what you might be getting into.
Should you move on a property, make a list of its
needs, and prioritize those repairs and
improvements: Which are vital? Which can wait?
Which are extravagances?
Has the house been well-maintained?

10. No matter what, kitchens
and bathrooms are
always worth the time
and money.
Dressing up the former with, for
instance, new flooring or
countertops, can be critical to
recouping value. Same for new
wallpaper or plumbing (or even a
mirror) in the bathroom. Bottom
line: These rooms are used hard,
every day of the year.

11. CASE STUDY
COSMETIC
REHAB
An attorney friend once informed me of a
client who was eager to sell her home in the
Chicago suburbs, as her parents needed to
move to a nursing home. The catch? The
home was overflowing with virtually
everything the family had accumulated over
the previous 30 years. I looked up the home
on the county assessor’s website, learned that
it would command a $340,000 asking process
when rehabbed and reached out to the
owner. Her price? $270,000. I offered
$255,000, and told her she could take
whatever she needed from the home, and
leave everything else behind. It took some
$42,500 to clear the clutter and rehab the
place. We listed it at $349,900, and sold it
within two days, for $345,000 — a net profit of
$47,500.

12. CASE STUDY
COMPLETE
REHAB
Our company purchased a three-story
Victorian home in Chicago’s Lincoln Park
neighborhood for $444,000, then set to work.
An architect was hired, the interior of the
place was reconfigured and made over and
after six months (and some $250,000 in
construction/rehab expenses), we resold the
place for $850,000, earning an industry award
in the process.

13. THANK YOU!
FOR MORE INFORMATION PLEASE VISIT:
MICHAELZARANSKY.COM