Written by: Melissa Enciso
Benefits of Being a Fixer-Upper
Investment in real estate has increased dramatically over the last couple of years. In the first quarter of 2022, investors made up 22% of all home purchases across the United States. Motivated investors have gained financial freedom but, for others, it was not the best business opportunity. When doing so correctly, acquiring and renovating a property can uncover benefits for the investor and the economy, especially when you are the fixer-upper.
Recognize that it will not be an easy project. Only the individuals who set their minds and bodies to the task will succeed and learn many skills. It takes an extreme amount of courage to tackle a rehabilitation project yourself but will encourage you to continue in your investing career. In this article, you might discover your inner contractor and recognize the benefits of renovating a property yourself.
Developing New Experiences
Becoming a fixer-upper will teach you the basics of starting and operating a business. Buying your first short sale or foreclosure home will teach you the process and will introduce you to financing properties available to you. The ability to set your own goals, tasks, and deciding when to work is a major benefit to doing the work yourself. Starting a remodeling project will put you in a position to earn money quickly and continue reinvesting in new projects.
Developing Real Estate Experience
Gaining experience in real estate does not only help you in this case but could lead you in multiple directions. When doing the work yourself, you start understanding the market and how it works at different times of the year. Recognizing and comprehending the market will help you discover what your target market really wants. Adding certain fixtures that are preferred by the potential buyers can sell the house all because you did a little more research. Little details can make a big change but investors also need to keep in mind the budget, the 70% rule, and how dramatically it can affect the after-repair value. Learning how much to invest in a property is something that investors often have trouble with. When the process starts, feelings for the property might start accumulating, and adding too many fixtures or decorations might not be the best for profits once the house is sold.
Developing Construction Experience
There is no better motivation than being trapped in a house with thousands of dollars already invested. As a new fixer-upper, it is not common to know all the ins and outs of the repairing, remodeling, and renovating that will take place in the rehab. There are also issues with building permits, material delays, holding costs and so much more. There are many resources to help you accomplish a task, step by step. YouTube and Google will be your best friends. The ability to search ‘How To’ videos in any case of confusion has become easy and free. Throughout the process, you will have access to sufficient experience and insight into the construction process which should be enough to rehab your property.
Everyone wants to be their own boss, setting their own goals, and hours and having it your way. As a fixer-upper you have to keep yourself accountable to get the rehab done on time and for it to sell at a good price. If that means going in after your day job or spending extra time on the weekend to get certain tasks finished, so be it. You will be the only employee for your new business so there is more responsibility on your shoulders, but at the end of the day, you get the job finished the way you want it.
Quality of the Work
When hiring a second party to get a job done, many things are not always guaranteed. The second party could not do the job how you wanted. Maybe the material they used was not to your liking or they might take longer than anticipated to finish the job because they have so many other projects to finish first. Doing the project yourself gives you the opportunity to pick out the material, execute the work to a high standard, and complete it on your own timeline. There is no waiting and negotiating with outside contractors that will then quote you outrageous amounts. As someone who is just starting in the business there might not be much capital, so cutting labor costs could be very efficient.
Execute Your Vision
Choosing flooring, cabinets, sinks, tile, appliances, and everything else can be very tedious. Cabinets that do not match the backsplash or tile that does not compliment the flooring and vice versa can really throw off a potential buyer. As a hands-on fixer-upper, you get the opportunity to decorate and add all the details exactly how you want. You have your vision for your renovation from the first time you step foot through the door. Doing the work and deciding what will go inside the house yourself will make sure nothing is miscommunicated. You can make sure the backsplash complements the cabinets and the countertops and when you’re shopping and an idea comes to you, you can act on that vision yourself. It might take lots of YouTube videos to get the hang it but it will be done your way, with no second thoughts or opinions. Looking back, you’ll be able to see everything you did and how well it turned out and know that you were responsible for it.
Remodeling a property can be a remunerative business for part- or full-time flippers. If taken seriously, a property remodeling business can generate thousands of dollars and possibly match or exceed a full-time income.
When opening a business, huge startup costs are required. Purchasing a franchise, licenses, and buying an abundance of inventory and equipment, are all basic costs in starting a small business. When the capital you need is not there, banks aren’t necessarily the best option. House flipping does not require as much personal capital as other businesses. Even if you have no money there are other financing options using other’s money and leverage. Hard money loans are the most popular way to start your house-flipping business. There are no credit checks and it's a fast, seamless approval process.
Saving Labor Money
Hiring a contractor to do certain jobs means paying for the quote, the materials, the labor and more. Contractors often have a small catalog of materials, leaving you without the ability to find affordable options. Performing the work yourselves will save on labor and give you the flexibility to find materials that fit your budget.
Saving on Materials
There have been times when the contractor uses all the material just because they have them. It’s possible that certain pieces that have been thrown away can be used in the same project. Take installing plank vinyl floors for instance. When cutting off a piece because the wall is in the way, the scrap can be used to start the next panel over. As the fixer-upper, you will make sure to be diligent when installing the floor in case you have any leftovers. There’s a possibility to return it or use it in another project. It is guaranteed that you will take more thought into the material that you bought over a hired contractor. The same thing goes for other materials including backsplashes, carpet, moldings and so much more.
Getting hands dirty is not for everyone, and not everything can be taught in a matter of days. There are specific tasks that might require the hiring of a contractor or skilled professional. Weighing your options and making sure the workers will do a job that you will feel comfortable paying for is essential. Double check their previous jobs, strengths, communication, worker availability, all while clarifying the cost of the project, and your involvement (ex. Unlocking property, leaving the house at a certain temperature, etc.). Sometimes hiring the right partner is a good option, but only you can make that decision with the information available to you.
The result of a rehab can be more rewarding than the actual profit. Seeing everything that you accomplished by setting a goal and putting your mind and body to the task can be fulfilling. Not only will it bring extra money to your bank account, but it will bring you more confidence and courage. A rehab will teach you many different skills that could potentially be useful in various fields. At The Hard Money Co., it is our pleasure to make the process as easy as possible for you. If you have any additional questions about how our process works, we're just a quick conversation away from putting you on the right path.