Fixer uppers, sometimes known as rehabs and junkers, are common investments in today’s real estate market.If you are wondering why they are such popular investments, there are several reasons.First of all, there is a serious abundance, and I mean a huge abundance of distressed homes in today’s market and they are selling for pennies on the dollar.Secondly, with the economy being so poor, the bottom line is that cheaper homes are easier to buy.People are in need of low cost homes, and this makes fixer uppers and rehabs an easy sell.But buyer beware, this doesn’t mean that all fixer uppers are a wise investment.
First of all, the vast majority of fixer uppers are located in low income, economically distressed areas of town.Most of these homes have a much higher investment risk simply because they are in less than ideal neighborhoods, and they do not appreciate in value.If you are a newbie investor, you may be wise to at least stay out of the worst areas of town.The reason for this is because as a newbie investor you don’t really know a good deal when you see one and overpaying for a junker will sink you!
Keep in mind that it is a buyer’s market and you can demand your terms and prices.If you cannot negotiate the price or terms you want, it is best to walk away.For example, if you find an owner willing to owner finance the property for you; it would be in your best interest to try to negotiate an interest free purchase.With so many distressed homes on the market, you should NEVER settle for poor terms when you can easily find what you want elsewhere.If the seller wants to get rid of their property badly enough, they will meet your terms!
People usually think of buying and selling when they think of buying real estate for profit but one of the most lucrative markets to invest in is rental properties. They provide long term residual income rather than a short term windfall. In general there is far less risk involved in buying rental properties.
Management
One of the key elements you will have to decide on if you think about purchasing rental real estate is how you will manage your property. If you just have one multi-unit building you may wish to completely handle the management of the property yourself. If your building is a larger one, and you do not have a great deal of handy-man skills and do not want to be calling contractors to handle every leak, clog, or patch up you can offer one of the units as a free rent for service to a skilled handy man. Keep in mind complicated repairs will still probably require hiring a contractor, but you can have some assurance that immediate needs can be met quickly and still handle the rest of the management yourself.
If you are considering owning more than one property hiring a property manager begins to make more sense and also frees up your time for other ventures.
Cash Realities
The cash flow of a rental property is more than just the value of its available units vs. its cost. Make sure there is enough income from the property to cover the expenses of utilities, taxes, legal fees you will encounter during the transaction and while you own the building as well as insurance.
Leverage
Owning rental properties accumulates equity that can give you valuable leverage when looking for loans for other real estate investments. That makes your rental property even more valuable than the actual income it represents. Owning rental property is one of the most secure methods of starting a portfolio and gives you a solid ‘hands on’ asset that very few other forms of investment can provide.
As a woman real estate investor I can tell you that today’s real estate market is very odd. For instance, some years ago when you were starting in the real estate investment market and wanted to make a profit on real estate “right now”, then you usually looked at the fixer upper, but today investors can find older homes that need work and new homes in about the same price range, that is,if they shop around.
So, you have to ask yourself whether buying that older home that needs work, or buying that new home is the better investment. That is why advice from real experts like Dean Graziosi and not the advice from scam artists is needed.
When I started in the real estate investment business, I found Dean Graziosi and the information he had to offer to be the real deal, but I also found a lot of scam artists. The problem is how can you tell who the scammersare, and who really has pertinent information worth getting.Well, the way I found out was by listening and reading what others have to say. I read a lot of tweets, and wiki information about Dean Graziosi before reading his books and enrolling in one of the seminars.
The information I received helps me determine what type of home to invest in and which is a better buy. Because there are times when that older home is the better investment and many more times when the newer home is the best decision. There are many factors you need to take into consideration to make that decision.
The point is, you need to shop around and list out the advantages of each before making such a decision and the only way you can list out the advantages is by being informed and educated in real estate investing. The best way to start becoming informed is by reading about real estate investing online, and reading real life testimonials from the average, everyday person. This is why sites like twitter and wiki spaces can help. Because the people that post to these sites are “real people” with real experiences in all kinds of things, including in real estate investing.
