What are fixer uppers?
I get asked for a fixer upper meaning all the time, and it’s really quite simple: any property that requires some amount of renovation, beyond cosmetic work (read: painting). Whether it’s an old kitchen or baths that need to be brought into this decade, or an entire whole-house gutting down to the wall studs with complete rehabbing of new electrical and plumbing as starters, fixer upper homes for sale can represent a tremendous opportunity for any investor. You can pick up some cheap fixer uppers that, once you’ve completed renovation, can earn you a tidy profit. Fixer upper houses come in all shapes and sizes, but they all have the same major component: they are waiting for some entrepreneurial person to come along, see the vision in what they can be transformed into, and know where to invest rehab dollars wisely for maximum re-sale value when the house is ultimately flipped.
The power of “no”
In my view, the most important aspect of buying a fixer upper is the ability to say “no.” You can never get too emotionally attached to your vision of what a house can be transformed into – and sold for a profit – if you don’t properly crunch your numbers, and stick within your limits. I have seen too many property investors who make the mistake of “falling in love” with a potential flip, only to slowly keep edging their counter-offers up, beyond what they originally felt was their top limit for what they would pay for the property. This is a rookie mistake. Don’t be blind to the emotional pull of it – remember – it’s not your home we’re talking about…it’s a simple business decision. And if it’s not right financially, then you move on to the next best alternative property available to make an offer on.
An example of restraint
I recently showed a property that is in need of almost a total gutting – but it’s a historical house with a rich history, and a rich price tag for renovating as well. My buyer, who’s been property investing for a long time, made an offer on it after crunching his numbers. He reasonably estimated the fix up costs, already had his team assembled for renovation, and had researched what the property could fetch upon resale, all fixed up. After his initial lowball offer (about half of the asking price) was rejected without a counter-offer, I recommended he counter with his “highest and best” offer for the property. He did so, and he came up only a small amount in price in so doing. This offer was rejected outright as well. We asked for a “come-up-to” price from the seller, but the seller would not provide one. So my buyer simply walked away from the deal…
In property investing parlance, this is known as “Next!” And he went looking for something else that would be a money-maker for him. However, he did one very smart thing before saying goodbye to this negotiation. He left the door open. He had me tell the seller that his offer would remain on the table, allowing for the seller to come back to him somewhere in the future, should the seller be unable to sell the property at the price he wanted. Very, very smart maneuver by my buyer, the seasoned pro. You just never know when a “no” can potentially turn into a “yes” by a seller.
Heed these basic rules
So when you’re searching for fixer upper houses to purchase, be sure to heed these basic rules for flipping investment properties. Never get emotionally involved in the decision-making process. Always crunch your numbers – then double check them until you feel totally sure of your financial constraints, as well as what you feel your profit will be on the investment. And last, always stick to your final number when making an offer – and don’t deviate upwards, regardless of the temptation to finish the deal. Remember, there’s always the rule of “next” – and you should move on to the next available property to make an offer on, rather than go in over your head on a potentially bad deal.
photos courtesy of profitindetroithomes.wordpress.co, stiles-law.com, consumerinformation.ca, propertymanagerpsg.com, zillow.com