Whether or not you decide to keep a property for long term appreciation and monthly cash flow or for a quicker profit flip the project, there will be times when you really have to dig deep in the numbers to decide when a property is ripe for a major rehabilitation or leveled completely as a tear-down.real estate investing

Some investors who run across such a potential project have decided long ago to forgo all the machinations and just tear the thing down and start all over. Still others decide to keep the foundation in place and keep what bones are still available and rehab as much as possible. When do you know if it’s a rehab or a tear-down?

The first order of business is a thorough inspection with your contractor to inspect the most important components of the structure. If the foundation is determined to be in good shape and the roof doesn’t sag then it might be best to rehab. But look on the interior too. Are any walls that seem to be sagging? Are the bathroom floors on an even plane or do they appear to list in one direction or the other? Pay close attention to water areas in baths, sinks and kitchens for signs of water damage. If all the major components seem to be in shape, have the contractor make an estimate on the rehab vs. building a brand new home. The math will help shape your direction.

However, when you approach a property and the first thought is, “Hmm, tear down or rehab?” then the property’s appearance isn’t at its best. If it looks like a tear down it may also hold a host of hidden “surprises” that make a rehab an unfortunate money pit.

Run both scenarios but if the foundation and major components are in good shape, then you may be moving toward the rehab. There’s no telling just from looking at the structure, but if you do ask that question, you know you still have a lot of work to do.