Fixer Upper Houses
Why buy problem properties? In part because fixer upper houses
have some advantages over other investments in the current real
estate climate (2009). If turned around quickly they aren't so
affected by falling prices for starters. Suppose prices fall
5% in the five months you own a home, for example. You're still
okay if you're selling for 20% more than what you've invested.
Flexibility is another advantage. You'll buy cheap because
of problems the house has, of course. Then if you resolve those
problems efficiently, you can always rent the house for decent
cash flow if you decide to wait to sell when the market gets
better. In good times and bad someone is making money in real
estate, and with that in mind, here are some tips to help you
make money with those fixer upper houses.
1. Create Great First Impressions
Often the first thing a buyer sees when coming to look at
your house is the mailbox. The good news here is that it's also
one of the cheapest things to replace, so never have an ugly
mail box in front of your house when you sell it. Get a new one
if necessary, and have the address of the property clearly showing
on it to help people find the house. You might also plant a few
flowers around it can help with that first impression.
2. Cheap Landscaping Options
Think of several possible plants and flower options that would
more or less equally improve the appearance of the front yard
or any parts of the property that are easily visible from the
street. With those possibilities in mind, buy the ones that are
cheapest at that moment you go to buy them. Have a plan, but
avoid getting fixated on one idea, or you may pay more for landscaping
that is no better than the alternatives. Keep in mind that if
you sell for the same price in the end, every extra dollar you
save along the way is a dollar more in your pocket.
3. Review Your Hazard Insurance
After you complete renovations you should increase the coverage
on your property. A fixer upper you insure for $140,000, for
example, could be worth $210,000 when your renovation is complete.
You will be under-insured if you don't boost that coverage. The
cost of raising the coverage is minimal compared with what you
will lose if there is a fire or other disaster while you are
waiting for a sale.
4. Prepare For The Unexpected
Budget for unexpected costs with fixer upper houses (and any
real estate investments). Include at least $2,000 for "unexpected
costs" in your planning. Even after the most careful planning
and doing dozens of rehabs, one investor I know averaged expenses
of $3,000 more that he estimated for his projects. Expect the
unexpected with real estate - and plan for it.
5. Remember Holding Costs
Time costs money in real estate. You have to pay taxes, insurance,
interest and utilities for every day you have a house. When working
on a fixer-upper take that into account. Suppose your holding
costs are $240 per week, for example. In that case it might not
make sense to wait several weeks in order to get that "bargain"
painter to work on your house if that's going to mean selling
it later.
6. Update Your Education
Sit down at the local bookstore and look through the real
estate books. It's is a great way to keep up on new ideas for
your fixer upper houses and for real estate investing in general.
Do this while actively investing and your unconscious mind will
tend to guide you towards the books that can help you with your
current challenges. Buy a few books that you think you'll refer
back to later.
Another page you might want to read:
How to Sell a House
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