Fixer Upper Foreclosures
Add value to your foreclosure house and increase your profit margin.
Why fixer-upper foreclosures?
- Some people simply don’t care about their property as they fear that they are going to lose it. That’s good news for those who do care.
- They may not have the time to improve their home. They have so much debt problems.
- They may not have the money to fix it.
Is fixer upper foreclosure home good for you?
If most of the following questions describe you, then the fixer-upper foreclosure business is right for you:
- You are short on money.
- You want to buy a house in a good home neighborhood without paying the full price.
- You plan to make a smooth transition to your own real estate business.
- You have some experience in fixing things.
- You enjoy and have the patience to negotiate with sellers.
- You are ready to take some calculated risks.
And finally,
You have time to spare for this business, or have family, friends, or professionals for foreclosure repair and improvement.
Some observations in buying a foreclosure fixer upper properties
Start with residential foreclosure properties rather than commercial and industrial properties in the beginning.
Everybody needs a home. The residential market is more stable and expanding.
- There are no bad times for real estate. If the economy is in a recession, you may catch good deals. Many investors make more profits in bad times.
- Home prices are lower/depressed. Look for low cost at buying
- Interest rates are lower. Look for low cost of home mortgage loan for 15-30 years.
- Your foreclosure fixer upper is collateral, so you can easily borrow on real estate. You can use other people’s money easily.
- Real estate makes you look rich, because you have your property on the “assets” side of the balance sheet.
- Start with low-cost foreclosure in fixer-upper condition to gain experience and move on to higher priced properties. Learn from your mistakes in fixing and underestimating expenses (overestimating doesn’t hurt that much!).
- Positive cash flow is most important, so if a higher value fixer-upper looks promising, go for it!
What kind of foreclosure fixer upper property should you buy?
The worst–looking fixer-upper foreclosure may be your best option. It is not the appearance that counts. Cleaning or even replacing dirty and bad smelling wall-to-wall carpet, or scratched wood floors is not a big deal. Bad colors, scratched paint on the walls? No problem. On the other hand, a good-looking property may have a plumbing problem, which is much more expensive to fix.
Start with old foreclosure homes: Old neighborhoods are good places to find houses to fix.
- Old foreclosure homes are good fixer uppers. You may find many features to fix. Appliances, air-conditioning, and heating systems are probably old, inefficient, or need cleaning.
- Old foreclosure properties and buildings in a central location under a renovation and revitalization program offer an excellent opportunity. That is an indication of new businesses, new jobs and more income.
Location is a critically important consideration in investing foreclosure properties. Visit best foreclosure locations and focus on one or two regional areas to follow the trends and home prices.
Advantages of fixer-upper foreclosures
Your options:
- Do it completely by yourself (finance it + fix it up + keep all the profits).
- Do it with a partner (finance it + fix it up + share the profits).
- Work with the seller (seller financing + fix it by yourself or together + share the profits).
- Buy the foreclosure property on your own, have others fix it up, and enjoy all the profits.
- Sign a contract and sell (assign) the foreclosure property to another investor.
In the beginning: Concentrate on those foreclosure properties that you can handle on your own. Do your own foreclosure inspection before your buy and accompany home inspector to make sure that foreclosure property does not have a structural or serious problem.
Later: As you get to know people who can fix plumbing and electrical problems, then, buy fixer-upper foreclosure properties having such problems. You can make more profit.
Profitability and feasibility of your foreclosure fixer-upper: Critical points you need to assess
- How long will it take to fix it up? Time has a cost if you are not going to live in it.
- How much work is involved? Is it manageable for you?
- Is fixing it up something that you can do by yourself? If not, do you have people who will help you? (Feasibility)
- Will it bring you enough profit? (Profitability)
You may take one step further: Promote Yourself
By fixing foreclosure properties you are not only making money but also improving the neighborhood.
- Your neighbors will appreciate what you are doing.
- Value of their properties will go up with every single improvement made in their neighborhood. When you add value to the foreclosed property, average prices in the neighborhood will go up. Those who will sell their properties will benefit from the median price. Home appraisers will look at the recent sales figures and raise the value of the property on sale.
- Let everybody know what you are doing.
- Tell them you are looking for fixer-upper properties even if they are not in foreclosure status.
- Talk to people in their front yards.
- Send flyers and door hangers.
- Place a magnetic sign on your car.
- Leave notes and business cards at home improvement stores, hardware stores, and grocery stores.