Buying lower-priced fix-up houses, fixing them up using your own time and effort, and renting them out is a fairly low-risk, high-reward way to generate wealth and security. If you have been thinking about real estate investing, this may be a very good time to do it. There are many benefits in buying a fixer-upper and renting it out, especially in the current economic condition.
Photo by Rich115 via Flickr
The Four Chief Benefits of Investing in Fix-Up Houses
- When you buy a house in need of repair, you pay less for it than for a normal house. Since you paid less, you can take out a smaller loan and have lower monthly payments.
- By doing repairs yourself (as much as you are able to), you save money, and you learn valuable new repair skills.
- By renting, instead of flipping, you now own a house that is typically increasing in value (by an average 5% per year) the same time that the rental payments, and your monthly cash flow, are going up.
- When you approach retirement, your loans will be paid off (or close to it) and the now-higher rents that you continue to receive are like an extra pension for your retirement. For people who rely on stocks for retirement, that loud sucking sound they hear is the dollars flying out of their portfolio.
What About The Pitfalls?
Pitfalls to buying in fixer-upper houses, such as broken plumbing systems, worn out electrical wiring, and cracked foundations can be avoided with the help of a professional inspector. Once identified, these conditions can laid out before the seller, who must either fix the problems to your satisfaction, or you can pull out of the deal.
Of course, it takes hard work to find a house, make all of the repairs, and learn how to deal with tenants. If it were easy, everyone would be doing it. You’ll learn not to take life, or tenant problems, too seriously. Shakespeare said, “A light heart lives long.”
The good news is that before long your real estate business will be running like a Swiss watch, as you learn valuable technical and people management skills that are useful in many other aspects of your life. You are also rewarded with a feeling of satisfaction in your accomplishments, a stronger sense of financial security, and the peace of mind that accompanies it.
Fixer-Uppers + Recession = Opportunity
The time to buy in real estate is when prices are low and soft, and when interest rates are low. If that sounds like the present situation we are in, you’re right. In general, recession may be a good thing for fixer-upper investors for two reasons:
- Many people are reluctant to buy houses, or make any big purchases, until the economy picks up. This drives up demand for rental properties by tenants, and allows rental property owners to raise prices.
- Since demand is low and supply is high for existing houses, prices are dropping. This combined with the large number of foreclosed properties coming on the market, makes it an opportune time for investors to accumulate more rental properties.
This could be a once-in-a-blue-moon opportunity, and as Thomas Edison said, “Opportunity is missed by most people because it is dressed in overalls and looks like work.”
Here are additional articles written by Terry:
- How I Got Started Investing in Fixer Uppers
- Proactive Responses to Recession – 7 Creative Ways to Make Extra Money With Real Estate
- Why Buy a House Instead of Renting & How to Buy a House that will Make Money
Terry Sprouse formerly worked at the University of Arizona for 10 years. During that time, he started a business in his spare time buying fixer-upper houses and turning them into rental properties. In addition to his real estate business, he also writes books about real estate investing and how to become self-reliant, rather than relying on a 9-5:00 job for security. He is the author of Fix em Up, Rent em Out, and most recently, Carve Out Your Niche. He also the author of Fix em Up Rent em Out.