In a previous blog, we shared some simple real estate investing strategies that can help increase your income and even lead to financial freedom. One of those strategies is ‘Fix and Flip’ real estate investing. Here, investors find fixer-upper houses in need of repairs or upgrades, purchase them at significant discounts, fix them up, and then resell them at a much higher price.
If you’re handy with home repairs yourself, or have a great working relationship with someone or a company who is, this strategy could be an ideal way to earn a significant income. On the other hand, it’s easy to get in over your head if you don’t know what you’re doing. Learning how to find fixer-upper houses with the biggest potential can get you started in the right direction. Today, we’ll show you how to find these deals to begin with and then what to look for to increase your odds of a profitable investment opportunity.
How to Find Fixer-Upper Houses For Sale
#1: Drive By Real Estate
You can think of this strategy a little like window shopping. Simply drive around your preferred neighborhood and look at the homes for sale. Are there some that look a little worse for wear than others? Or, perhaps there are homes that look to be in disrepair that don’t even have a ‘For Sale’ sign in the front yard. All of these are options to consider. Houses that need a little TLC are often offered at a discount – the idea here is to scoop them up at a low price, fix them up nicely, and then sell them for a profit. Alternatively, you can fix them up and turn them into a rental property to increase your passive income.
Driving by potential fixer-upper houses can often give you even more information than what you might see in an online listing. For example, you can see what the surrounding houses and properties look like. A house that might be easy to fix and flip could be surrounded by several other rundown properties. This means you’re probably not going to get the most out of it when you eventually sell. Or, if you want it to be a rental property, you may not be able to ask for as high of a rent as you’d like.
#2: Build a Solid Relationship With a Reputable Real Estate Broker
Many real estate investors choose to look for fixer-upper houses on the Multiple Listing Service (MLS) – the website where real estate agents and brokers list properties for sale. The downside of following this strategy, however, is that these deals are often picked over. They’ve been listed on MLS, LoopNet, or other listing sites simply because they couldn’t be sold privately off-market.
My favorite real estate investing strategy is to get off-market deals – ones that aren’t even listed yet so the general public doesn’t know about them. How do you know what properties are going to be for sale before they get listed online? Develop a relationship with local real estate brokers. Let them know what type of property you’re interested in, whether that’s fixer-upper houses, multi-family apartment buildings, or something else. As soon as they notify you of a potential deal, check it out and then let them know in a timely manner whether you’re interested or not.
Pro tip: If you don’t communicate well with them, they’ll be less likely to send future deals your way.
#3: Contact Banks or Other Lenders
Many of the fixer-upper houses you’ll find are in foreclosure. They may have become rundown simply because the previous owners abandoned them or couldn’t afford their upkeep. Banks holding the mortgages on these properties often want to sell them as soon as possible to recoup their money. If you have a great relationship with local banks or lenders, let them know you’re looking for houses that need a little extra TLC. Or, you can search their websites for homes listed for sale or auction.
#4: Attend Local Real Estate Auctions
When property owners fall too far behind on tax payments, or their homes are in foreclosure, these homes are often put up for auction. Talk to your local tax assessor or government office to find out when and where property auctions are held. Then, you can attend these auctions and potentially pick up some valuable properties to add to your real estate investment portfolio.
Pro tip: Learn as much as possible about the auction properties and their location before you go to the auction. You don’t want to get caught up in the excitement of a bidding frenzy and pay more than the property’s worth.
What to Look For to Determine If a Fixer-Upper Is a Good Investment
Finding fixer-upper houses for sale is just one part of the process. Once you have a good system for finding properties, it’s time to narrow down your choices to the properties with the most potential for profit.
Before you add a fixer-upper to your real estate portfolio, here are a few key factors to consider:
- Neighborhood – Fixer-upper houses in clean, reputable neighborhoods with low crime rates and great school systems are more likely to command a higher rent or higher selling price once they’re renovated.
- Local real estate market – If your plan is to fix and flip, look for fixer-uppers in hot real estate markets. When houses in the area sell quickly and for more than the asking price, you’ll have a better chance to do the same when you go to sell.
- Extent of repairs needed – Obviously, a fixer-upper requires work. How much work and what type of work, however, will significantly affect your overall profit. Ideally, you’ll be able to find homes that simply need cosmetic or minor repairs. Larger or structural repairs can mean big dollars.
- The property itself – In addition to repairing the home, will you also need to clear trees or renovate a landscape? If so, this will add more expense and reduce your potential profit.
Learn How to Become a Successful Real Estate Investor
If you’re as excited about real estate as much as I am, you’re in for an exciting ride! My wife and I went from owning $0 in real estate to $5 MILLION in real estate by the age of 30. We’ve certainly made mistakes along the way but we’ve become successful real estate investors and entrepreneurs in the Detroit metro area simply by following some basic real estate principles.
Are you interested in learning more about how to become a successful real estate investor or entrepreneur? If so, I invite you to subscribe to my YouTube channel. There, I share real estate investing tips that have helped my wife and I along our journey. If we can do it, you can too!