Beginner's Real Estate Investing
Guide: How to Know When a "Bad House" Means "Good"
By Jeanette Joy Fisher
When you're just starting out as
a real estate investor, you'll want to look for ugly
houses that are in need of mostly cosmetic work to turn
them from doghouses to dollhouses. You'll be looking for
entry-level houses that only need some TLC, including
clean-up, interior and exterior paint, and perhaps some
new carpet.
It helps if you're somewhat handy yourself so you can do
as much of the fix-up as possible, but whenever you're
considering the purchase of a fixer, make sure to make
an honest assessment of your limitations and to use
caution when a home looks as if it will require
structural repair. My husband is able to do work on
structural beams, sub-flooring, walls, plumbing, and
electrical systems, but he's probably the exception.
If you don't feel comfortable
tackling certain types of repairs yourself, it will be
worthwhile to form an alliance with one or more
subcontractors who'll either do the work for a
reasonable price or will work for a share of the
proceeds once the house has been resold.
Rotten beams discovered after
carpeting removed.
If you encounter a house with structural problems, never
make any assumptions before you get estimates from
reliable contractors. As time goes by, you'll gain more
experience in how to do some of the less critical
repairs but especially at first, put your trust in the
expertise of experienced professionals. Once all of
their estimates are in, you can take them into account
before making an offer on a property that has structural
problems.
Once you get your team together and have successfully
renovated and resold several properties, you'll begin to
feel more confident when bidding on houses that will
require more repairs than the average real estate
investor feels comfortable doing. That can be a real
advantage when looking for homes to turn over, because
not only will there be less competition but you'll also
be able to negotiate a lower price by using the cost of
repairs as a bargaining chip.
Finished living room, prior to home staging.
Being able to tackle some structural problems will open
a greater market and will allow you to buy homes other
investors would ignore. This can be especially
profitable if the problem house happens to be in a very
desirable neighborhood, because you'll have the
potential to get back a greater amount for each dollar
you spend when fixing the house up for resale.
When you're first beginning to look for investment
properties to fix and sell, it will be wise to be one of
those timid investors we've just been talking about.
After all, you won't have the time, money, expertise, or
support network to be able to tackle the more difficult
houses at first, and you won't be able to afford to make
a big mistake. However, after having fixed a few
properties, your confidence level will grow, along with
your support network, and then you can move up to the
next level of fix-up.
Until then, remember that bad can be good when it comes
to real estate investing, as long as it's not too bad!
Copyright © 2006 Jeanette J. Fisher
