July 13, 2024


Mad about real estate

Investing In Fixer Upper Houses – Six Tips

In the current real estate climate (2009), fixer upper houses have a couple advantages over other investments. First, if they are turned around quickly they will not be so affected by falling prices. After all, if prices fall 5{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} in the five months you own a home, you’re still okay if you’re selling for 25{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} more than you have into it, right? Second, you are buying cheap because of problems the house has, and if you resolve those problems efficiently, you can always rent the house for decent cash flow if you decide to wait for a better time to sell. With that in mind, here are six tips to help you make money with those fixer uppers.

1. First Impressions

A mailbox is often the first thing a buyer sees when coming to look at your house. It is also one of the cheapest things to replace. Never have an ugly mail box. Buy a new one if necessary, and have the address of the property clearly showing on it. Planting a few flowers around it can help with that first impression as well.

2. Landscaping

When landscaping, think of several possible plants and flower options that would more or less equally improve the appearance of the house. Then, when it is time to get them, buy the ones that are cheapest at that moment. If you get fixated on one idea, you will often pay more for the same end result. Remember that if you sell for the same price in the end, every extra dollar you spend along the way is a dollar less profit.

3. Hazard Insurance

Increase the coverage on your property after you complete renovations. If you buy a fixer upper that you insure for $150,000, for example, and then it is worth $220,000 when your renovation is complete, you can be very under-insured. It may be months before you sell it, and the cost of boosting the coverage is minimal compared with what you will lose if there is a fire or other disaster.

4. Plan For The Unexpected

Always plan for unexpected costs with fixer upper houses. You should probably include at least $2,000 for “unexpected costs.” An investor I know – even after the most careful planning and dozens of rehabs – found that he averaged $3,000 more that he estimated in costs. Always expect the unexpected with real estate, and make it part of the budget.

5. Watch Those Holding Costs

Remember the cost of time. You are paying taxes, insurance, interest and utilities for every day you have a property. Consider these holding costs when working on a fixer-upper. For example, if your holding costs are $250 per week, it might not make sense to wait several weeks in order to get that “bargain” painter to work on your house.

6. Keep Getting Educated

Browse the real estate books at the book store. This is a good way to keep up on new ideas for your fixer upper houses and for real estate investing in general. Also, if you do this while you are actively investing, your unconscious mind will tend to guide you towards those books (and chapters) that can help you with your current problems.