Buying A 'Fixer-Upper' For Resale
Buying A 'Fixer-Upper' For Resale
Michael Corbett (Real Estate Expert) gives expert video advice on: What is a "fixer-upper" property?; How much work goes into selling a fixer-upper at a profit?; What are some common mistakes people make when buying fixer-uppers to develop? and more...
What is a "fixer-upper" property?
The term fixer-upper actually means property that you can go and buy, and then actually make renovations to the property and do the necessary improvements to put value into it, and then go ahead and either live or sell the property. Its different than something that's a tear down property that someone would just come in and bulldoze. Its one that has a lot of potential for upgrade or that you going to actually do to work or hire someone to do the work and fix it up.
How much work goes into selling a fixer-upper at a profit?
Fixing up a property isn't just about going in and painting the walls white, and having somebody come in and put in new carpet. If you want to make money in flipping a property, you're going to have to go a little bit deeper than that. I talk about doing actually six levels of improvement when you flip a property. That's, of course, getting all the systems, which is the plumbing, the electrical, the piping, the roof, and even the windows; they all need to be upgraded. Remember, you're going to be selling a home to somebody that is a done or completed house. All the systems need to be working as well. Chances are you're probably going to have to upgrade the kitchen. There's lots of way you can do that. You can usually work with what you've got, or you can completely renovate a kitchen and the bathroom. There are certain areas that people expect, when you're fixing up and flipping a property, that are done and completely redone. Kitchens and baths are another. Landscaping, curb appeal, backyards, and all those things are things that you're going to have to do. Yeah, there is some work involved but the profit potential is enormous when you know what you're doing.
What are some common mistakes people make when buying fixer-uppers to develop?
Probably the biggest mistake people make when they're buying a property to fix it up is what we call overcapitalizing, meaning they don't take into account, and they don't do their homework to find out, what's going on in the neighbourhood. They'll go ahead and upgrade things that either don't need to be upgraded, meaning they'll put in granite countertops when all the neighbourhood homes just have tile. Or they'll put in a spa or Jacuzzi when no one else in the neighbourhood does. Or they'll do the opposite. They won't bring the house up to the standards of the other houses in the neighbourhood - meaning they don't make the house up to standard. If every house in the neighbourhood has granite and a beautiful swimming pool, you're probably going to have to do that. So, not being aware of the competition is one of the biggest mistakes that people make.
Should I live in a fixer-upper while it's being improved?
If you're going to live in your house while you're flipping it and renovating it and fixing it up - it's a challenge I'm going to warn you about. Yes of course you are saving money by living in the house, because you have to live somewhere, but you need to know how to do it properly and I always try to teach people it's about making sure you have a working bathroom, make sure that one of rooms is always sealed off. It is incredibly challenging and I've seen many relationships go down the toilet when the toilet goes out into the driveway. So if you are going to do it, be very careful and do a little research and read up on to it to find out all the ways to make it as simple and as comfortable as possible for yourself.
What are the most expensive improvements a fixer-upper might need?
When you are fixing up a property, one of the big chunks of your money is going to go to the kitchen. That is generally where the biggest improvement takes place, because you've got appliances, you've got cabinetry, you've got countertops and you've got plumbing and sinks and all of those elements. That is generally where a big chunk of your budget goes. Another big chunk usually goes to the roof or upgrading the electrical or the plumbing. Those are some of what we call the “big tip” of items when you're renovating.
What is one of the least expensive improvements a fixer-upper might need?
There are two things that are really simple improvements that give you the biggest bang for the buck. They're really the ones that create the biggest lifestyle appeal to people. Landscaping, and people forget all about that. People, when you're buying a house, please plant all you're planting early. If you're going to keep a house for six months or a year, get your plants in now. It doesn't cost you much to buy them small and let them grow over the year. But, get your landscaping down right away, and let it grow in. Because there is nothing more inviting than a beautiful lust green front yard and backyard with lots of flowering plants and landscaping.
What resources do I need to get started fixing up a property?
When renovating a home, it takes a village, so you need a team, and I call it the dream team. So what you're going to do, especially on you first property that you fix up, is remember that these people are going to work with you from house, to house, to house. So you want to start lining up a good roofer, you want to look for a contractor that you will like, you can even go to home improvement centres and have them do some of the work in your first home. You're going to want to start to accumulate that team, so that would include: electricians, plumbers, sub-contractors, contractors, and you're going to want to start interviewing. And do this before you close on a property so you start to begin to have a team in place.
What are some improvements to avoid on a fixer-upper for resale?
The best way to avoid the most common flipping mistake is overcapitalizing, is by doing your research. You really need to be going to all the open houses around the neighborhood. Find out what the other houses in your neighborhood have, so that you need to know what you need to have and also find out what they don't have so you can avoid having to spend money on things you don't need.