Home foreclosures and fixer-uppers have long been a focus of many real estate investors looking to make big profits. Of course, if the target property doesn't meet certain criteria, an investor can lose their investment as well as any profit that was to be gained
Use a step by step mind set. "Go by the numbers" when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Please Note: The following elements discussed are not listed in any particular order. Nor do they all hold the same value in relation to each other, but they must ALL be considered in their entirety. The property should meet at least one of the criteria, and should have no unjustifiable issues in any one single area.
Here is the list I have used:
HOW MUCH AND WHY
Investors ALWAYS see the price first.
So the goal is to buy for cheaper then the current market value and sell within market value or above. so how come the seller is offering such a GREAT price. Is it to settle debt??? Is it due to divorce? Death in the family?
If not, there may be problems with the property that require major expense to correct. Structural problems such as a cracked foundation or outdated plumbing and electrical wiring. The last two are VERY common in older craftsman homes from the 30-50's. CONSIDER HOLDING COSTS
My personal opinion is that the holding cost are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs...and dont forget the gas and electric.
If your not up on the market your shopping in...your going to loose money.
Price other property inthe area. Come as close to the size/style/lot size you are looking at buying.
TAKE ADVANTAGE OF TERMS AND CONDITIONS
Price and location are important this is true. but dont forget about the financing.
In fact, used wisely, an investor can pay full price and use this positioning to negotiate lower interest rates or a smaller down payment. Over time, the rental cash flow will be in the black because of the terms agreed upon by the buyer and seller, combined with gradual rent increases and price appreciation.
KNOW THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? where are the closest fire/police/EMS services? How good are the local schools? Dont rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
LOCATION IS NO TO BE OVER LOOKED
If your shooting for a long term tenet or residence then location is the second most critical thing to look at...however if you have a chance to turn a good profit for a ugly house in a less then 4 star area...that profit might out shine a nice little bungalow on the beach.
FIXER UPPERS AND FORECLOSURES
In the case of a fix andflip and some times a foreclosure. It is the job of the investor to facotr in the repair costs. A keen eye can save you lots of money in a very short time. (Not to mention a good understanding of home repair work)
With small repairs such as painting, minor landscape, and basic flooring, profits may be available but not really worth the risk. More significant profits are found with extremely distressed properties. Plumbing is corroded, the roof needs replacing, and the interior needs to be gutted and remodeled, but the seller is asking 50% of the market value and you can repair it for much less. Always factor in the amount of work that you are looking at?once you have a rough idea of the cost of the expense?add on another 5% as a buffer.
GET IN A ZONE WITH ZONING
Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.
Think of it this way, what could make you more money...a single small house on the land you just invested in...or a duplex on the same land? One tennet or two? Zoning is a gift or a curse depending on your plans with the property...make sure you know before you buy it.
Watch out for "Owner conversions" where owners, aware of the zoning ordinance, have made changes without the oversight of the local building authority. Garages being converted to second units on a duplex lot are common examples.
About the Author:
Doc has been a investor since early 1990's. In 2006 he started a online real estate investing information website. He hopes to help or investors by offering m information on real estate services that will help m
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