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Fixer’s and foreclosure properties have always been the “jewels” that RE investors look for in order to make big profits. However if you dont do your home work before hand you may lose not only your investment but your profit as well.

Use a step by step mind set. “Go by the numbers” when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.

Nothing on this list is really more important than anything else. Its just here to get you to think about what exactly you need to look for. While you may have an investment that excels in one area…it cant be problem heavy in another.

Here is the list I have used:

KNOW WHY ON PRICE

Price is the first thing and investor sees.

We are all looking for below market value. Buy for a little, sell for a lot. But why are they selling so low? Is it to solve one of the “3 D’s”? (Debt, Death, Divorce)

What problems does the property have if any? Old cracked and faulty plumbing? Bad electric? If its an older craftsman style home those problems are very common. Is the foundation in good order? Don’t forget holding costs.

My personal opinion is that the holding costs are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs…and dont forget the gas and electric.

A poor understanding of the current market value is another major deal killer. Remember market value is an educated guess at best. No one really knows until the appraisal is complete.

YOU MUST ANALYZE similar properties in the area. Keep in mind that prices are set at the margins and may reflect the extremes of a particular housing market environment.

TAKE ADVANTAGE OF TERMS AND CONDITIONS

Price and location are important this is true. But dont forget about the financing.

If you have the means you can pay full price but jockey for a FAR lower interest rate or a smaller down payment. Over time your cash flow could be in the black faster due to the terms you set up.

RESEARCH THE LOCAL MARKET

Experienced real estate investors try to learn everything about the market they are shopping in. Sometimes its the small details that give the property you’re looking at the best chance to appreciate. For example: How close is the nearest church? Is the area family friendly? What is the local crime rate… is it close to good school? Where is the closest Fire/police station? Does the neighborhood have a community watch program? Next factor in the local floor plans that surround your target property. Was the last owner primarily concerned with vacancy rates, so they keep prices low instead of upgrading the property? In contrast, your research shows that particular upgrades like air-conditioning, second bathrooms, or enhanced security allow for both lower vacancies and higher rental rates.

LOCATION. LOCATION. LOCATION.

Most investors think location is the second most critical thing in the investment next to price. Truth be told…it is only critical if you are looking for a long term residence/renter scenario. If you can make a great profit on an ugly house in a less then great area. It may out shine the “perfect condo” by the beach.

DISTRESSED REAL ESTATE

A familiar area ripe for investment picking is distressed properties or fixer-uppers. Of course these are the houses that need repairs to some degree. And the investor’s job is to discount the costs of these repairs enough so that the profit is still suitable.

Fixer properties are a treasure trove to a savvy investor. If you have a good eye for details and can spot maintance problems you can make a nice return on your investment. Things like a bad roof, poor plumbing or a bad foundation can be very costly to repair. Once you have an idea of what youre looking at for repair cost, do yourself a favor and add a little buffer say 5%…just to be safe.

GET IN A ZONE WITH ZONING

Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? Worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.

Understand that a single use zoned property is always cheaper than a multi use.

Garages converted without permits, Granny flats that get added…etc…etc. These are common examples.

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