Buying a 'fixer-upper'...good idea?

[Thomas]

My uncle & I are looking in to buying 'fixer-uppers' and reselling them. We know a good handfull of others who do this and have heard a lot of good reasons to get into it. It is something we would be doing with only one house at a time since we both have day jobs.

Can you give your pros & cons on this? Any caveats?

Thanks,
Thomas

[Rich]

Just make sure you know what needs to be done with pricing etc.. before you purchase. Have a good idea of what homes in that area are going for - then you can see what you're going to make off it relatively close. Then you can determine if it's worth it or not.

[plunkinberry]

Where you make the real money at in an endevor like this is being able to get a GOOD deal on the initial price of the house. You need to be able to purchase it significantly below market value (appraised value).

You should probably form an official partnership and incorporate your company so your uncle and you don't get into any issues regarding who is responsible for what and if things go south, who is responsible for what. A division of profits is also good to put in writing. Make it official, or I promise, it'll come to haunt you at some point - it may not be soon, but it'lll happen.

Next, you'll need to develop a VERY good relationship with a realtor unless one of you has the ability and desire to do this type of thing yourself.

I love the idea and have thought about it many times myself. My father tried it during the summers (he was a school teacher) when I was very little with some other guys he worked with and they were never able to make any real money. Yes, they made money on their deals, but not enough considering the investment they'd made (initial money and time). Maybe I will still get into it later... but be careful doing this as a partnership and discuss EVERYTHING before you get into this endevor.

[Thomas]

Great input. Thanks very much.

Between the two of us, we are in pretty good with a small handful of realtors, so hopefully things will go well on that end.

We have discussed the partnership/incorporating idea, but have decided to try it without doing that at first. It isn't going to be something we get really deep into, just a house or two at a time. If we decide to keep one and rent it, or end up with several at once, we will likely take that step then.

I appreciate all the input from you guys and wish I would have found this site much sooner.

Thanks again,
Thomas

[OriginalSin]

TO make any real money on this type of real estate deal you have to purchase the home at .50 to .60 cents on the dollar. Otherwise, forget about it.

[VALENT]

Pros- if you like this type of work, you can make money, will give you something to do after work and weekends, get to make lots of decisions


Cons- can be lots of work, can be stuck sitting on a property for a long time, can lose money, may be more wrong than you initially thought,

[Sparks]

Just really make sure that you have the time to do this. Weekends and nights don't always accomplish alot and it get's old and very tiring fast. These days especially, carefully consider the ever increasing costs of materials or you may end up paying out more than you get back.

[Thumper]

My next-door neighbour has made a great new business picking up "partials" and finishing them ready for market. Since the boom in HGTV and other home re-do-it shows there are an abundance of wood-be home renovators (mostly yuppies) buying distressed houses and sinking lotsa cash into them only to find out they get way too deep way too fast and just give up... at quite a loss (often leaving hords of new materials onsite or in transit). Two years ago he was driving a 15 year old chev with 300,000 km on it - this summer he came home with a new mustang GT and I noticed last weekend he was building partboxes & ladder racks to put onto the back of his new ram 2500. At least here there appears to be a significant remarket (mortgage rates going up helps). It helps also to have contacts within the banking institutions to get leads on upcoming sales before they go into auctions and distressed sales, some folks would rather make a get-out-of trouble-deal before going through any formal permanent record making paperwork. Do watch out for transfer and capitol gains taxes though they can take a really big bite out of you.

[CThomp]

Where in Florida? The market is slowing down in my neck of the woods. I'm in Ft. Myers. My house is in an older neighborhood with a bunch of small over priced homes. Way over-priced homes. Some guys across the street have a house on the market they are flipping for $319K. They bought is for $230k I think. That was back in May. They've missed their window I think. Most of the over-priced homes in my neighborhood that were forsale over a month ago are still on the market. People just want to much money for to little house. My house was way over priced as well. But I bought location.

[dantheman9727]

Location is key! Certain areas of Florida do very well for flipping, but too often people get too excited and buy a house without investigating the area. You should be able to look records online to see what houses in the area are going for, or a realtor can help you with this. Determine what the house will end up consisting of and decide if it is worth it to you. Obviously, you also have to know what you're doing to fix it as well.

[Richard A Hetzel]

The word "flipping" makes it sound so easy. "Heaving" might be a better word. Nothing is as easy from the inside looking out as it is from the outside looking in. The same cautions apply as in any business deal...do your due diligence. Don't just "think you can make a profit, or "hope" you can make a profit...you have to know you can make a profit. If you do as well as to break even on your first one, chalk it up as a learning experience, and hope you have the wherewithal to continue.

[AustinRealEstate]

There are some great points in the comments here, but one thing that was not mentioned is change of use. A few partners and I purchased some run down apartment complexes, rehabbed them and sold them as condos and did well. The main thing in investing is to be creative and run down all the ideas to see where you can make money. Valued as an apartment complex we paid market rate, but by adding value in both construction and in taking the building condo we paid way under market for what the building was worth as individually owned units.

Joe