Buying "Fixer-Uppers"

Ask many a home buyer about the type of house they are looking for and many will reply "We are looking for something we can fix up and live in (or resell). We like the idea of gaining some quick sweat equity." The classic "fixer-upper" home. Unfortunately though, there is a bit of fantasy in the notion.

• First of all, there are many more fixer-upper buyers than there are fixer-upper properties.

• Second, the current thinking in many minds is that anyone can make a killing in the Real Estate market, which is not always the case.

• Third, many buyers totally miss-estimate the cost, the feasibility and the time involved in fixer-uppers, severely impacting (and in some cases destroying) the profit potential. Unless you are fully prepared to deal with the realities of fixer-uppers rather than the fantasies, it probably is a good idea to look elsewhere for a home.

This does not mean that there isn't equity to be gained (or profit to be made) by purchasing the RIGHT property at the RIGHT price. The important notion is to understand that there are several factors that will make the difference between winning and losing in such a transaction.

Keep an Open Mind

The first factor that must be understood is that it isn't going to be easy. The only people who think that finding, buying, fixing and selling a home is an easy task are usually those who have never done it. Those with any experience (even if only once) will tell you that it rarely is as routine as it appears. In general, it is best to assume that repairs will cost twice what you estimated, take double the amount of time and, when finished, the house will be worth less than expected. If you keep that in the forefront of your thinking, the chances of being burned are much less.

If you are considering buying a Fixer-Upper property or investment it’s a good idea to bring a structural engineer and your contractor for an estimate of repairs and also, if applicable, check with the City, County and Coastal Commission for permit issues, rules, restrictions and regulations for major repairs / remodeling.

For more information or to see fixer-upper properties contact Lea & Leon Johnson. They can brief you on which remodeling projects will give you the highest percentage return on your investment.