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How to Find Fixer Upper Houses: A Guide for Real Estate Investors

CEO Khai Intela
Buying a brand new home can be challenging, especially if you're on a limited budget. That's why fixer upper houses have become a popular choice for many homebuyers. However, before you take the plunge, there...

Buying a brand new home can be challenging, especially if you're on a limited budget. That's why fixer upper houses have become a popular choice for many homebuyers. However, before you take the plunge, there are important factors to consider. In this guide, we'll discuss the pros and cons of fixer upper homes and walk you through how to find the best options. Let's get started!

What is a Fixer Upper House?

A fixer upper house is a property that requires maintenance and renovations. These homes are sold at a lower purchase price compared to turnkey homes, as the cost of repairs and improvements falls on the buyer. Fixer upper houses are a great option for buyers who want to get more value for their money or for investors looking to make a profit. Many buyers choose to live in their fixer upper homes while making incremental improvements over time.

home fixer upper Picture: A fixer upper house

Pros of a Fixer Upper House

One of the advantages of buying a fixer upper house is the lower price tag compared to turnkey homes. Even though you'll have to renovate it, you'll benefit from a lower list price and down payment requirement. Fixer upper houses also tend to have less competition from buyers, increasing your chances of getting a great deal. Many people enjoy the process of customizing their home to their taste, which can be a rewarding experience. When renovating a fixer upper, you have full control over the budget, contractors you work with, and design choices.

Cons of a Fixer Upper House

It's important to consider the drawbacks of buying a fixer upper. Renovations can be expensive and risky, with unexpected problems and delays potentially driving up the cost. It's nearly impossible to accurately estimate the total cost of fixing up a home, as hidden issues may arise during inspections. Additionally, living in a construction zone can be inconvenient, sometimes lasting for months or even years.

How to Find Fixer Upper Homes

If you're convinced that the pros outweigh the cons and you're ready to find a fixer upper house, here are some tips for real estate investors:

  • Drive For Dollars: Get in your car and drive around your desired neighborhood. Look for homes that appear neglected or in disrepair. Untended yards, boarded-up windows, peeling paint, and uncollected newspapers are signs of potential fixer upper houses. Jot down the addresses to identify and contact the owners.

  • Search the MLS: Access the Multiple Listing Services (MLS) with a real estate license or work with an agent. Look for short sale or real estate owned (REO) properties. Properties that have been on the market for more than 90 days could indicate motivated sellers or distressed homes.

  • Auctions: Check your local newspaper and county website for real estate auctions. Participate in online or in-person auctions to find foreclosed homes at a good price. Be cautious not to get into a bidding war.

  • Real Estate Investor Websites: Explore real estate investing websites that offer public real estate listings, including off-market properties like foreclosures, short sales, bank-owned, and auction properties. Some websites require a paid subscription for access.

  • Bank & Lender Websites: Visit bank and mortgage lender websites to find bank-owned or real estate-owned homes. These homes are usually sold at an affordable price, as lenders want to recover costs. Check their dedicated sections for listings and submit your offer.

  • Tax Records: Conduct some detective work by accessing public tax information on your local government website. Struggling homeowners who are behind on their taxes may be at risk of foreclosure. This provides an opportunity to make an offer directly to the homeowner before the property falls back into the hands of the mortgage lender.

  • Real Estate Agents: Partnering with a real estate agent can be beneficial since they have access to the best deals in the market. They can use their network to develop a shortlist of fixer upper homes for sale and provide valuable insights. Agents also have access to the MLS, which can help you find potential fixer upper homes.

fixer upper homes Picture: Fixer upper homes

How to Buy a Fixer Upper Home

Buying fixer upper homes can be broken down into six actionable steps:

  1. Schedule an inspection: Before considering a fixer upper, get a thorough home inspection to identify necessary repairs and estimate costs.

  2. Estimate your costs: Factor in the cost of repairs, cosmetic updates, labor, materials, and supplies. Obtain quotes from contractors in your area to get accurate estimates.

  3. Obtain any required permits: Check with your local government office to determine if any permits are needed for certain projects.

  4. Determine DIY projects: Identify which projects you can tackle yourself to save money. This includes simple tasks like painting or more complex renovations if you have the skills.

  5. Secure a loan: Explore financing options like FHA 203(k) or Fannie Mae Renovation Mortgage loans that can help you purchase a fixer upper house and fund renovations.

  6. Submit an offer: Negotiate a fair price based on your inspection results and cost estimations. Include contingencies to protect yourself from unexpected issues. If negotiations fail, consider walking away.

Are Fixer Upper Houses a Good Investment?

Fixer upper houses can be profitable when done correctly. The resale value should exceed your purchase price and renovation costs. However, it's important to conduct due diligence and carefully analyze the deal. Comparing prices of comparable homes in the neighborhood and obtaining reliable estimates from contractors is essential. Fixing up a home can boost its value if you can be sure of turning a profit.

Which Fixer Upper Homes Should You Buy?

There's no magical ability to find the perfect fixer upper with no surprises. However, you can adopt certain practices to find the right properties for your portfolio. Start by analyzing your budget and assessing potential improvements within your price range. Look for fixer uppers priced right, considering how much you stand to gain from the deal.

Summary

Investing in fixer upper houses can be rewarding if approached carefully. You can secure a property at a low price and customize it to your taste. Fixer upper homes are a cost-effective way for homebuyers to get more value for their money and make the home their own. For investors, fixer upper houses offer opportunities to make a profit. Remember to research how to find fixer upper homes and conduct due diligence to mitigate risks. Fixing up a home can boost its value while staying within your budget.

Ready to take advantage of current opportunities in the real estate market? Click the banner below to attend a free online real estate class and learn how to get started in real estate investing.

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