Entries Tagged as 'Secret Fix-up Techniques'

FIXING HOUSES LOTS DIFFERENT TODAY

A friend of mine, Bob, who is about a whisper away from being a total klutz, recently rewired two add-on rooms in his house with just a little help from the clerk who sold him materials. The very knowledgeable clerk explained exactly how to install new wires and ~tri drew a simple sketch showing my friend how to conned all the circuits. The fact that Bob didn’t bum his house down or electrocute himself sold me on the proposition that today’s do-it-yourself movement has come a long way since the time I did my own plumbing work.

It seems like only yesterday that do-it-yourself owners had to learn some basic soldering skills if they intended to do their own plumbing chores. Today, unless you’re messing around with copper supply lines, basic plumbing parts are all made from plastic. You simply cut ‘em with a hacksaw and glue ‘em together. All that maze of twisted pipes under the kitchen and bathroom sinks-it’s all plastic now. The whole shootin’ match comes in a card­board box with pictures on the back. Every clerk at the do-it-yourself store is happy to explain what goes where if you get stuck or end up with parts left over.

Giant handyman stores are in fierce competition for the do- it-yourself trade. They stock acres of every building product imaginable for doing your own home im­provements-­or fixing some­thing that’s busted. The whole idea is to hook a new genera­tion on doing stuff for them­selves. Don’t get me wrong, not every job is a candidate for do-it-yourselfer investors. As a general rule, I’d be very careful with jobs that concern safety, like gas piping and electrical upgrades. These jobs normally require building permits and because of the extra liability, contractors should generally do the work.

In Search Of Profitable Fixers

You’ll notice I said PROFITABLE FIXERS in the title! There are literally hundreds and thousands of fixer houses on the planet, but many are not worth the time of day. As you develop your fix-up skills, you must make certain you are rewarded appropriately for your efforts! Don’t waste your time fiddling with fix-up projects with “skinny profit potential”. I often tell my students: We are looking for a particular set of circumstances more than for a property. We’re looking for fixer properties with all the right things wrong with them!

FINDING BIG EQUITIES

I’m looking for properties where sellers have large equities. Obviously, it means the debt is smaller and the seller has probably owned the property for quite some time. He’s allowed it to gradually run down hill – “property milkers” we call these sellers! They pocket all the rental income with no intention of putting any money back into the property for upkeep. Finally, the property is rundown and becomes a pigsty!

Big equities are necessary because most sellers develop a mental block and become negative if your offer is less than the mortgage balance! For example; suppose they owe $75,000 mortgage debt on a property I believe is worth $100,000 to me! I would like to make an offer for $70,000 total. Sellers will almost always refuse my offer and quite often feel insulted. There’s also a good chance they’ll refuse to negotiate any further with me.

On the other hand, using the same $100,000 value, let’s say they owe a mortgage balance of $50,000. It’s much more likely they’ll now accept my offer for $70,000! It’s easier for the seller because now he has some room (equity) to work with me on the price. In the first example the seller would need to pay me $5,000 to make the deal work. With additional equity, however; the seller now gets to pocket $20,000 if he accepts my $70,000 offer. More equity allows him to take less for the property – and not feel insulted.


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