Fixer’s Quicker Cash Flow – Less Competition
There are many good reasons why fixers are the perfect properties to begin a real estate investor career. However, leading the list is CASH FLOW. Fixer houses by far offer the best opportunities for small-time investors, without, much cash to spend, to acquire real estate with minimum down payments and still achieve cash flow quickly. No other kind of real estate I know of will do it!
CASH FLOW QUICKLY
It is reasonable to expect – after paying an average of 10% down that one can create a positive cash flow property within a relatively short period of time after the purchase. Obviously, the time it takes will depend on many factors, such as how long does the fix-up take – how much market value is added to the property and most certainly, the skills and aggressiveness of the investor-fixer.
I have learned from experience – cash flow is much easier to achieve buying small multiple residential properties, such as 2 or 3 houses on a single lot, several duplexes with a house or two, or any combination of these cluster type properties. I own many properties with 5 to 8 living units each. They are excellent cash flow producers a year or so after fix-up. My timetable for a complete turn around is 18 to 24 months.
LESS COMPETITION
Anytime there are fewer buyers who want something in a particular market, your odds for success are greatly increased. Competition is what drives up prices. Conversely, the lack of competition keeps prices down. It’s nearly impossible to purchase prime real estate at a discount – or expect to get any sort of a break on the terms. The reason: Too many buyers are willing to pay the asking price. Why would the seller need to discount?
There are basically only 2 methods to buy real estate at bargain prices:
Method #1
Situations Situations where you are the only potential buyer who knows about the deal (no competition), and the seller is willing to accept your offer and terms without seeking outside bids (offers) from anyone else.where you are the only potential buyer who knows about the deal (no competition), and the seller is willing to accept your offer and terms without seeking outside bids (offers) from anyone else.
Method #2
Where the public knows about a property that’s available but cannot visualize its potential value – like after it’s all fixed up. They are therefore not buyers – only lookers.
Most students who seek my advice are not yet sophisticated enough to be in the information loop where they can benefit from Method # I. Two of the most common ways Method # 1 is used is by licensed real estate agents who buy their own listings – and by friends of probate attorneys who get a secret telephone call when an asset (real estate) needs to be disposed of quickly. In both cases, the public never finds out about the deal. Private deals avoid competition – therefore, the selling price don’t get bid up!
Method #2 is how most of my students will buy real estate. We shall focus in a market where properties are for sale. They are even advertised and certainly known to many potential buyers. However, 95% of all the potential buyers (the competition) see ugly rundown houses as junk- ~~ poor investment not even worth the asking price. Most will never make an offer and those who do will likely alienate sellers by insulting them with “low ball” offers. With 95% of the competition out of the game, the playing field is definitely tilted in our direction.
7 Responses to “Fixer’s Quicker Cash Flow – Less Competition”
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Jay,
Most of my houses were obtained by Method # 2. Mostly burned out amateur landlords who became highly motived to sell at well below market once a deadbeat tenant trashed their house. When I shop for houses, I look for FSBO signs attached to houses with that sad neglected look. The owners are always happy to talk to me.
Roy
Roy – You are right on target. You are acquiring houses that look like Don’s houses you saw at Fixer Camp during our field trip. When you learn to spot the potential quickly – then act, your competitors are left in the dust! When you get rich (which is bound to happen), your friends will all say — There’s Roy, the luckiest man inthe world! No one will have the slightest notion that you developed your millionaire skills. It’s lonely at the top!
FIXER JAY
Jay,
When will your latest book be available for shipment? I want my future copy to be personally signed by the author. I don’t have time for book signing tours.
Roy
hello Jay,
I am just getting started and have a million questions. I have your book and find it most helpful. I guess what worries me the most is just starting-finding a house and turning it over as a rental. The economy in New Jersey seems to be as bad as anywhare else, however, I know that it is not as bad as it seems. People are out there and I honestly believe their is a great need for clean rental houses as so many people are losing to foreclosers. I am most worried about cash flow and the ability to invest to fix up a home and quickly rent it. I myself am limited in cash. I lost my job and want to take a leap of faith in this business. I can’t really afford to make mistakes. Any adivise will be greatly appriciated.
Thank you!
Mark
You didn’t say which of my books you are reading, however; they all recommend several units together as opposed to a single house. The odds are better that you’ll always have some income – plus, multiple units are cheaper per unit, which means your rent to value ratio is better. That means a higher rent return for a lwer valued unit. Rent to value is explained on Page 110 of “INVESTING IN FIXER-UPPERS”.
If you are brand new – a good seminar like mine would help you a great deal. You can’t learn everything in 3 days, but you would learn some basics to start you on the right foot. My seminar workbook is available for those who find it impossible to attend. Call if you wish: 1-800-722-2550.
FIXER JAY
Thank you Jay for getting back to me! Yes I have the book you have mentioned. I will try to attend a seminar in the near future. Multiple units are hard to come by in this area at reasonable price. Duplexes seem to be a good way to go, however, if the home is not an exisiting duplex am I allowed to convert a building (single family home) into a duplex for added rental value? -providing the dwelling is in an authorized zone. Some towns allow you to rent out an apartment or an above garage studio etc… Can a duplex be created in this type of zoning or does it depend on each town and their own set of regulations? It is amazing to me that I can look at ranch house and determine how to split it into two. Have you ever done this? When a home is constructed initially as a single family dwelling does it have to stay that way forever?
Thanks,
Mark
Converting single family houses into duplexes is usually not productive – goes double for inexperienced investors. It’s filled with many pitfalls. Recommend buying rundown units and fix them up for new investors starting out!
FIXER JAY