Real Estate Fixer Uppers -- Are They Worth It?

Real Estate Fixer Uppers -- Are They Worth It

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If your looking to get into the game of buying houses by fixing them up then reselling them, you have the task asking yourself a few questions. Remembering you don't have to actually do the fixing up part yourself. The answer is what's your time worth and how much of it are you willing to give up? Can you do some of the repairs or will you need contractors to do all of it?Every item you add into the repairs list will cut into your profits. However, this is not really a problem just make sure your purchasing the house for enough lean way to cover repairs. It all starts with figuring out, what's the house worth once it's fixed up in the current market. Where is it located and how far is the house to schools, shopping, recreation and hospital?Let's start with putting a dollar amount on the house and what are the repairs. Lets say the house will be worth $120,000 once all the repairs are taken care of. Then make a list of repairs that must be done. This would be carpeting, shingles, painting, yard work, new appliances, fixtures and door knobs. There are more, but you get the idea. Then make a list of what you can do. Changing light bulbs, mowing the grass, rimming the trees and a few other small things.As we continue with this example the repairs come to $11,000. Then another $2,000 for holding cost. This is insurance, taxes, utilities and interest on the loan. Then another $2,000 for unexpected items that may come up. In other words in case you make errors in the repairs cost. Believe me something unexpected does come up, almost always. So, we add all this up and we come to $15,000 to take off the after (ARV) repairs, value of the home. Maybe subtract another $3,000 just to be safe. At last what's your time worth in handling this fixer upper house? Lets say that's $10,000. The offer you should make in this example is $95,000 for this house.In the beginning you may want a real estate agent or an appraiser to come up with the figures until you get a good handle on it yourself. Because if you make a mistake you could wide up costing yourself thousands of dollars. A mess up in the beginning of your real estate investing career could be short lived, unless you have a large surplus of cash on hand. So, there you have. Is the real estate fixer uppers worth it to you?

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