Fixer-uppers represent Real Estate Bargains For Handyman Types
Do actual residential real estate bargains exist? Yes. Are they easy to find? Contrary to what some real estate “gurus” touting their books and tapes via infomercials may tell you, the answer is: not as easy as “falling off a log” but very possible. Indeed, with some persistence.
ome can even be found, at “below-bargain” prices.
If you drive around your area with a scrutinizing eye, you can spot homes that, for one reason of another, are in a state of disrepair. In fact, it seems that in all but the nicest neighborhoods and subdivisions (where this situation would be unthinkable), there’s at least one house that would qualify to be a “handyman special” — often with a “For-Sale” sign planted in the front yard.
Also, these types of properties are sometimes fairly easy to discern by viewing photos of homes for sale in a realtor’s office, coupled an asking price a good bit lower compared to similar-style homes in the surrounding area.
Perhaps a divorce, a death in the family, illness, loss of a job, or other unusual circumstances made it impossible for the owner to meet his or her financial obligations, resulting in the inability to properly maintain the home. Oftentimes, the owner will be so desperate to sell what they see as a financial burden, that you will be able to negotiate a price amounting to 50 percent under the market value (sometimes less) of comparable homes in the vicinity.
For those of you who are of the carpenter/electrician/plumber ilk, a “handyman special” can represent an especially attractive financial opportunity, especially if your intention is to rehab the house and sell for a nice profit. It is not uncommon for investors with “handyman” skills to buy distressed properties at super-bargain prices, spend a few thousand dollars on materials (oftentimes less), zilch on labor costs, — saving thousands of bucks — and quickly selling the home at its true market value, while walking away with many thousands of dollars in profit.
Even for those of you who aren’t the “handyman” type, there’s hope in profiting from on of these “fixer-uppers.” One option is to enlist the help of friends who may be more adept than you when it comes to using a saw or power drill. This would definitely be a cheaper way to go than hiring a contractor or two – it is not uncommon to pay professionals $25,000 or more to get an average 3-bedroom single-family house into nice marketable shape.
Thus, your profit margin would be greatly reduced by going that route.
In addition, depending on the severity of the home’s disorder, you might be fortunate enough to get away with making only mostly-cosmetic changes rather than structural renovations. If your pretty good with a paintbrush (not a hard skill to master, by any means), can use a hammer without breaking a finger (or some other unintended object), can handle a lawn mower with the best of them, and don’t mind, the least bit, getting dirty, you may be able to do most of the work yourself.
Remember, also, if you’re not trying to make a living from fixing up and reselling distressed properties, you will need to factor in the amount of free time you have available to rehab a “fixer-upper” in order to determine the viability of the project.
And, above all, do the math. A general rule of thumb is that your projected profit margin should be at least double your expenses. For example, if you bought a distressed home for $100,000, and you intend to sell it for 150,000 (a $50,000 profit), you will want to limit your expenses to about $25,000. However, a lesser profit may be fine, depending on your goals and limitations.