Investing in Real Estate with Fixer Uppers
Finding Fixer Upper Deals
The hardest part of finding fixer uppers is, finding them. Fixer uppers can be found anywhere. They may be listed on the MLS, listed for sale by owner, sold at foreclosure auctions, HUD homes, Short Sales, or might just be abandoned vacant properties that aren't for sale at all.
The easiest place to look is the MLS as it has the majority of all houses for sale.
A few Things to Look for in a good flip property on the MLS:
- Minor Repairs that make the property unappealing to most buyers. Things like ugly paint jobs, dated carpet, cabinents, and fixtures.
- Houses with Large Square footage but few bedrooms and baths. Ordinary buyers never purchase one bedroom houses.
- Properties that may be subdivided. Where the highest and best use may be in the land.
- Properties that would be easy to add on too.
- Properties that may be zoned for multi family or commercial use.
The most important thing is that they can be purchased at a rock bottom, low price. Real Estate investors must make sure they won't lose money under worse case scenarios. Many properties listed on the MLS will not go low enough to be worth your time.
Finding Foreclosures
Foreclosures are a great way to find good fixer uppers because most foreclosures are pretty beat up. Before the prior resident left the house they made sure they didn't take any special care of it before the bank took the house back. There are several stages of the foreclosure process that have different investment opportunities. It is important that you understand each phase. There are a couple PAY foreclosure services that offer excellent information on foreclosure properties during all stages of the foreclosure process. The two that I have found that are best are Foreclosure.com and Realty Trac. You can gain some access without paying, and both services offer free one week trial periods.
Making the offer on beat up properties
Negotiating the offer properly is a crucial step to getting fixer uppers for the best price. Because many beat up homes are bank owned, or owned by sellers who know the condition is less than perfect, you are far less likely to "offend" the seller than with a normal real estate purchase.
Tips for making offers on fix up properties:
- Get the help of an experienced Realtor, who can give you comparables of othere distressed properties, and properties of the same age and size that are in good shape:
- Estimate the costs of all the repairs, and then double that amount.:
- Always make the offer for less than what you really want to get the property for. Calculate what you really need to get the property for, and then offer 5% less.
- Some sellers have lived in dumps for years and in their minds their is nothing wrong with the house. These sellers are unrealistic and won't lower their price enough to make the deal worthwhile. When you can't get the property for less than the amount you need to make a profit, don't buy it!
Fixing the properties so that the value increases the costs
Not all improvements increase the value more than the cost, especially when you consider the cost of your time. For details of which improvements yield the greatest return check out the cost vs. value analysis.
How to Flip the Property:
After the property is fixed you'll want to sell it quickly. Many buyers are more skeptical of houses that haven't actually been lived in for a while.
- You should hire a quality listing agent.
- Price the Property Slightly Below Market Value
- Emphasize all the new feautures you have added in your marketing and
- Stress all the new items, upgrades, and ammenities.
- Consider Seller Financing or Lease to Own Options for maximum return.
