If you want to become a real estate investor, find a "fixer-
upper" owned by an anxious seller. Finding distressed houses
at bargain prices, fixing them up, and then selling them on a
consistent basis can make you a multi-millionaire.
Why Sellers Sell At a Discount
Homeowners' problems often prevent them from staying on top
of their home's upkeep, and factors such as job loss,
divorce, serious illness, various addictions, or other
personal problems quickly overwhelm them. These sellers can't
make the needed repairs because of financial or physical
limitations, and when that happens, their home becomes a low
priority and sometimes will go into foreclosure.
Look for the "Triple D"
Home sellers with three problems give beginning investors a
great opportunity. A "Triple D" is a Doghouse, involved in a
Divorce, and in Default. The label "doghouse" comes from
Southern California Realtors who used this term to describe
the worst fixers. These houses maybe "tired" and need only
cosmetic work in order to favorably compare with other homes
in the area.
What to Look for in a Doghouse
The hardest house for a homeowner to sell is
a "doghouse," "dump," or "fixer-upper." These run-down houses
scare off most buyers, who don't have the money to cover the
down payment, closing costs, new furniture, carpeting,
appliances, roof repairs, and other deferred maintenance
required to bring the home back into top condition.
As you look through the classified ads or at realtor
listings, keep an eye out for terms like "handyman
special," "as is," "fixer," or other tell-tale words. Also
have your agent use similar terms when scanning the Multiple
Listing Service for your target area.
Once you've found a property that you can turn from doghouse
to dollhouse, find out the seller's problem and then offer a
solution. Distressed sellers frequently experience financial
problems and need cash as soon as possible. Therefore, if
you're ready to close quickly, you'll be set to negotiate a
lower sales price.
How to Close Quickly
Find an experienced lender and get yourself not only "pre-
qualified," but also "pre-approved." Taking that second step
assures worried sellers that you already have your loan in
place for their property, and this puts you well ahead of
other potential buyers.
How to Know When "Bad" Is Good
When you first start out in the real estate "fixer" business,
you'll want to look for "ugly" houses needing only cosmetic
work. Look for entry level fixers that just need some
cleaning up, painting, and carpeting.
When you're new to the fixer game, always remember your
limitations and use caution when considering houses needing
structural repairs. My husband replaces structural beams, sub-
flooring, walls, plumbing, and electrical systems, but he
acquired those skills after years of experience.
If you find a house with structural problems, get estimates
from reliable contractors to do the work. Experience teaches
you how to do more over time. Until then, rely on experienced
professionals to do the repairs. Take professional estimates
into account before deciding whether or not to purchase an
investment property.
The Easiest Houses to Sell
A dollhouse, located in a popular neighborhood, sells the
quickest. For instance, we once sold a home we named "Orange
Tree Cottage" in just three hours! To qualify as a dollhouse,
a home must be in a location that buyers want and must offer
the number of bedrooms, bathrooms, and amenities they're
seeking. Beyond the price, however, buyers purchase the house
that meets both their basic requirements and their emotional
needs.
Filling Buyers' Emotional Needs
After many years of investment experience, we've found that
using Design Psychology and Marketing Psychology techniques
greatly increases our profits. Both concepts go far
beyond "curb appeal."
For instance, we use colors that target our prospective
buyer's income level and match the selling season. Generally,
buyers of higher-priced homes prefer complex colors, and
using cool colors during hot weather and warm colors in cold
seasons makes buyers feel more comfortable. We also paint the
front door a happy color and entice buyers into the house by
placing potted plants on the porch.
Over the years, we've bought and sold dozens of distressed
properties. By using caution and common sense, as well as
following a few simple rules and using Design Psychology
strategies, you, too, can become a wealthy real estate
investor!
|
