Best Market For Rehabs?
What is the best market range for rehabs? In Tulsa area we have a slum area where old houses go for 30-40K or less, then a southern midtown where 40 year old houses go for 100-150K, then there is the ritzy areas where 50 year old (and older) houses go for $300K and way way up...
I'm not sure if I want to spend much time in the slums - people get shot there. I'm kinda thinking I could buy one of the expensive houses that has been lived in for 40 years and not updated for maybe $250K, then paint, redecorate, renovate the kitchen and baths with state of the art everything and sell for a lot more. Is this a viable option or would I even break even with all those expensive amenities being added? I don't have the funds to do this yet but would enjoy it in the future.
I asked my real estate agent about doing things to the middle class homes such as new cabinets and appliances in the kitchen, tile, new thermal windows and so forth. She said that we would not make all of our money back on such updates - that all it would do is guarantee a quick sale. Do I have to buy a home at well below FMV to make a profit rehabbing? The only houses around here that are well below FMV, at least in the middle price range, have at least minor structural issues or water damage, which scares me, or they need a lot more work than just updating. Also, I kinda want to live in the house while rehabbing. Is buying a damaged goods home the only way to make much money in rehabbing?
It is hard to make money rehabbing unless you buy the house at less thatn FMV. Otherewise it is really hard to get your money out of the updates. You can find those properties even through a Realtor. Look for estate properties, forclosed properties or "need to leave with speed" properties. Tell the realtor what you are looking for. Or look for them on your own. It never hurts to know a good estate lawyer.
There is a tax law out there that could greatly benefit you if you live in the propety while you fix it but you'd have to live there for two years. If you have lived in the property for 2 years and then you sell it you will not pay any capital gains. Be careful if you rent it out after though because you will only have three years to sell it after you move out otherwise you will lose the tax exclusion benefit.
"it's hard to make money rehabbing unless you buy below FMV"
That is the under statement of the year. You must buy at 20-60 cents on the dollar to have any shot at all at making money rehabbing, WAY below FMV, deeply below
I think you can make money in any market on rehabs, if you buy right. I would stay out of what Steve Cook calls "war zones", the kind of area you described where people get shot. I like the "first-time buyer" areas. To get the most profit out of my deals, I got my real estate license. Now I have unlimited, anytime access to the MLS. I hung my license with the top real estate agency in my area (nearly 200 agents). I am in the process of establishing a relationship with a hard-money lender, but I have lines of credit that allow me to make "all cash, quick close" offers. Now I don't have to pay a commission for buying or selling (unless another agent brings a buyer for a house I sell). This has, obviously, increased my profit.
Also, make LOTS of offers and be on the constant search as you drive through neighborhoods while doing errands or sifting through the classifieds. Network with a birddog or wholesaler and pay them well. Get a good crew that can fix those structural-damaged houses (not as scary after you learn a bit about that stuff) and be there when they do the work, if possible, to see how they do it. Go to the Home Depot free classes and learn everything you can so you can supply your own labor to cut costs.
Above all, READ. There is much excellent information on these boards as well as excellent advice on what courses are good to help take you in the direction you want to be (and most you can buy right off this site!). I would start with Steve Cook's rehabbing books (if you haven't already)
Never stop learning and don't let anyone tell you that you can't make money doing a particular aspect of real estate. I believe anything is possible if you put your mind to it!
I'd have to give a thumbs up to Shirley,
If you improve the property, the market value should go up. You still never want to pay current FMV or your profit (unless you are selling owner finance at an extremely high rate) would really suffer.
If you deal in the "war zone" you need to be prepared to go to the "war zone" to collect. That could be a pretty tall task. You would probably go broke trying to keep your materials and tool from being stolen while you improve the property.
Good Luck..
i have rehabed several homes and done well. i depends on your term of rehab some think its "lets burn it down and build it back." to me its some paint, new carpet, and just a good clean up. i am setting in one now and its just as i decribed. its a divorce sale. i got it for $115k its valve is between $229k and $259k it will take about $15k to rehab. it the deals are everywhere you just have to keep your eyes and ears open. ggod luck. kenmax
If you want to work the upper area of town cause you think they do not shoot, why go for it. Do not be suprised if they do shoot, even the best of persons go occasionaly nuts.
Thank god the upper classes are uniformily bad shots. It takes poverty and constant practice to really shoot well.
In that upper area you look for properties in which the owners are experiencing "Domestic Problems" Specialy the unfriendly ones where he comes home and finds her in the arms of his best friend, or his gardner, er visiting Guru, whatever. Nobody wants to speak to anybody and they want maximum harm to the other ex partner.
So you help. You arrange the purchase of a half interest for real cheap cause you tell that person you will really work over the opposite member. Then with that deed in hand duly notarized you go over to the other side of the fence and you try to buy that half or undivided interest, The basic same conversation as before but switch genders, except in LaLa land.
Then possessing the two halves each bought way under market, go to work on the house. Move in you will hear some great stories from the neighbors. Also they know all the local handymen etc.
Most such purchases are so far under the market that all is required is a funny www.sign.to sell. For Example.
Help! This lovely house needs a change of Karma.
Prior Owners hate each other, Will sell house to somebody who has a good working marriage. Do you qualify?
signed The House
See what I mean. Abandon the concept that an examination of the real estate is the ultimate reality. The ultimate action is the Negotiation. In this one you use the principal older then god. Divide and Conquor! I think some drunken Roman politician that got stabbed by his best friend said that, you know the one that pretended to be a Soldier? Come on thats the one that said "All Gaul is divided into three parts." Actualy at the time there were five parts, but then who ever knew a politician that could give a right count.
Out here our new Governor cannot even pronounce the name of the state correctly. I must admit its a bit kicky.
Caulifornia indeed.
Lucius
Lufos...you crack me up!!
nice!
I have had my best luck in the mid-priced houses. My life and my investments I feel should be in my hands. Not in the hands of a crack pipe toting holligan. This is why I will not invest in these places. My rule of thumb is if I want "to carry" just to look at a property then I choose to stay away. I am sure that I have missed out on a lot of opportunities because of this practice. Thats fine by me.
Quote:
On 2004-02-11 20:12, JohnNH wrote:
My life and my investments I feel should be in my hands. Not in the hands of a crack pipe toting holligan.
Whyever not? What have you got against them?