Tips on Buying Your First Fixer-Upper
By: Joe Luckino
Well, it’s time to jump in the water and get your feet wet. The first thing you want to do is get out there and start looking. Talk to real estate agents, look in the classifieds, and keep your ears open for a good deal. You want to find the worst house on a decent street; you don’t want to end up with the nicest, most expensive house on a not so good street. If the house is in a bad area, it will be harder to sell because the location is not that desirable and your prospective buyers will be harder to get pre qualified for financing. Find a house that is structurally solid but needs some major or minor cosmetic attention. Minor cosmetics come in the form of carpet, paint, ceiling fans, light fixtures, and landscape. Major cosmetics are the windows, bathrooms, kitchens, and roof. The items to steer clear from are leaky basements, bad foundation walls, septic and well problems, and structural problems with any pavement or interior walls.
Once you find a home that you think could be a winner, there are a few things off the bat that you should do. You will want to get comparable sales for similar homes in the area to see what they are selling for. This will give you a good idea on what your home will sell for once it is remodeled and ready for sale. The next thing you want to do is make price sheet of everything that needs done and come up with a ballpark number. It is best to be conservative and take the high end of the estimates. That way you can cover yourself and if you end up going under budget you’ll make more money. From there you want to add the repair costs and borrowing costs together. If you take that sum and add it to the purchase price, you should only be at 70% of the after repaired value.
For example, if the house would sell for 100k after it is all fixed up; you do not want to owe more that 70% of the ARV or 70k. So if it is going to take 20k to fix it up and 5 k in borrowing fees, then you would want to pay somewhere in the vicinity of 45k. That deal could possibly net you a profit of 30k.
Find a bargain, price your expenses, and buy your first fixer-upper – one that makes you a great paycheck.
Copyright 2006 Joe Luckino
About the Author:
Joe Luckino is owner and cofounder of Money4Investors.com. Money4Investors.com is a real estate investing information site that helps investors find financing, other investors, appraisers, contractors, realtors and much more. Money4Investors.com also has over 1.2 million foreclosures, pre foreclosures, tax liens, bankruptcies and wholesale listings. For more information visit: http://www.Money4Investors.com.