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Houses Under Fifty
Thousand |
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.
Houses Under Fifty Thousand
| Fixer Upper Houses |