The Millionaire Blog

Why would any sane person want to buy ugly, beat-up, neglected houses as an investment? The answer may surprise you. Ugly and neglected houses are like diamonds in the rough waiting for someone like you or me to cut (fix) and polish (paint) them into profitable gems. The answer may surprise you. Ugly and neglected houses are like diamonds in the rough waiting for someone like you or me to cut (fix) and polish (paint) them into profitable gems.

Fixer-uppers hold a tremendous amount of potential for the beginning investor as well as the seasoned professional. In some areas competition for fixer-uppers is very low or doesn’t exist at all. You can usually buy them with seller financing, because most lending institutions won’t lend money on fixer-uppers. In my opinion, if done correctly, buying, fixing, and selling (or renting) fixer-uppers is one of the best ways for beginners to enter the world of real estate investing and gain financial independence.
Here are the top 10 reasons to invest in fixer-uppers:

10) Low purchase price: our formula states that we don’t buy a property unless we can get it for 40%-60% below market value or ARV ( after repair value).

9) Low or no down payment: Often times sellers are very flexible with down payment options. Remember they want to dump these properties. Bartering can also work with for you especially if you have something like a boat or used car etc.

Seller Financing: Conventional lenders usually do not lend on fixer-uppers it’s too mcuh of a risk for the lender especially if you are a rookie investor. Sellers can and are often very willing to finance most if not all of the mortgage.

7) Forced Appreciation: These properties, due to neglect, have depreciated in value. Your hard work and knowledge will fix these properties and bringing them back up to market value. You are in essence forcing appreciation through repairs.

6) Income Increase: Once these properties are fixed your more likely to increase income (rents) on these under-performing properties. Better properties usually always mean higher rents.

5) Improved cashflow: Fixing up the property and removing problem, non-paying tenants will improve your monthly cashflow.

4) Reduce operating costs: A well maintained house needs less maintenance. Less maintenance translates to lower operational costs. Reducing costs improves profits.

3) Savings opprtunity: If you have some basic repair or carpentry skills you will have the opportunity to save up to 70% of repair cost. Remember 70% of repair cost is labor, labor you can do yourself. That’s savings that go in your pocket.

2) Low or no competition: Our niche market has few competitors. We not only choose houses that are in dire need of repairs but we look for and farm neighborhoods that offer the least competition.

1) Personal Satisfaction: There is a tremondous amount of enjoyment and pride when you are able to transform a diamond in the rough into a real gem. You’ll feel a great sense of accomplishment, the new owners or tenants will feel a sense of pride of ownership and the neighbors will be grateful because you have improved their neighborhood. It’s a win-win for everyone.

It takes hard work and a well-laid out business plan to succeed as a fixer-upper investor. If you are willing to commit the time and make the effort to learn how to buy, fix, and sell (or rent) fixer-uppers, then you will have found a great way to become financially independent.