The real estate investing market is hotter than ever, meaning everyone wants to invest in real estate.
Stocks have been unpredictable and maybe even Wall Street is putting much of their funds into single family rental investing. If real estate investing works for Wall Street, why should you let them skim the profits away first? Many choose to go directly to the source and have more control over their investments by owning them direct.
One reason I love buying fix and flip properties is it offers multiple options for an exit strategy. I can keep it and cash flow it or, if the market is appropriate, I can flip for a quick profit to buy another.
Often buy and hold investors will buy fix and flip properties as a strategy to acquire a chunk of money quickly to use as a nice down payment and quick equity position for a property that will be a great buy and hold investment property.
Real Estate Profit By Thinking Outside The Box
For the past decade investors have had the privilege of snatching up property with great cash flow and equity potential. Now the cream has been skimmed off the top and deals are harder to find.
Yet seasoned investors are still finding a great deal of success with investing. How do they do this?
For starters the competition is not looking in the places that the seasoned investors look. The typical investor looks for property they can quickly and easily make profits on. Have you ever heard the expression “if it were easy everyone would do it”. Well the past decade has been easy and everyone seems to have been investing. Now that the market has tightened those looking for these easy deals cannot find them and therefore tend to vanish back into hiding. But, I can share some if their secrets that will help you find them as well.
Secrets To Find Investments When Others Can Not
Manufacturing a great investment property is perhaps the most rewarding investment experience you will have. It takes more hard work, but it is sort of like hunting or fishing. Half of the fun is in the hunt. The reward is in the find.
Rest assured you will learn more about properties, the cost of renovations and investing in the process. With these sharper skills you will be an overall smarter and better investor.
Find value where you do not see it
- Add a third bedroom: A 3 bedroom, 2 bath home is the bestselling, most highly sought after home in the country. So it would make sense that you want to have one of these to sell for maximum liquidity and profits. However, when the market is tight these can be hard to find. So savvy investors manufacture them. They find 2 bedroom homes that have dens or great rooms or lanais or some room in the house that can easily be converted into a third bedroom. Close an archway off, add a closet and and you have a very cheap third bedroom.
- Pull the laundry room inside: Many homes in the South have laundry facilities out in the garage. I just visited a 2,100 sq. ft. house and the laundry was in the garage. When selling a home for top dollar people want indoor utilities. Often you can create a laundry closet or even small laundry room indoors by adding a wall or a simple re-configuring of a floor plan.
- Add a bath or increase its function: Often homes have 1 and a half baths. Many times these half baths can easily add a shower or tub and increase the value of the home with a little re-configuring of space. Don’t let walls scare you, they often can easily be removed. (check with your architect or contractor and get needed approvals)
- Finish off basements: This is a huge opportunity for locations that have basements. I have done many fix and flip properties by buying a nice property with an un-finished lower level. This is a blank canvas for you to be creative and as the structure is already in place it is a very economical space to finish off and increase sq. footage.
- Add a garage: If you have a nice property and space to add a garage, often this can be very beneficial. This all depends on your local market and the normal in the area where the property is located but when you are in a subdivision with garages and your property does not have one it sticks out like a sore thumb. Often the cost of the garage will increase the total property exponentially.
- Convert the garage to living space: This one may sound contradictory, it all depends on what is the norm in your area. If it makes sense in your area to take existing garage space and inexpensively add living space then you will want to explore this option.
Find the buyer/renter needs, offer the solution and create value
I could give these examples all day long, but I think you see the picture. All that seasoned investors do differently is to think outside the box. They manufacture growth by creating value in a property with inexpensive alterations. Often homes are built and over time they become aged and dated. They no longer fit into today’s lifestyle and open floor plans we are now accustomed to. So find the needs, offer the solution and create value.
Don’t take shortcuts
Okay, it may be compelling to take some shortcuts and just rip into those walls like you see them do on the home improvement shows. What you do not see going on behind the scenes is the pain in the A&%.
Part of it is applying for building permits. Do not take this shortcut. Not only can they find you working on your home without a permit and shut you down, you also lose the value.
The value of these alterations comes from being able to sell them to the next buyer when you sell. If you do not pull permits, the tax records will show the property as it used to be and this is where the value will be placed.
In order to sell the new and improved value requires the building dept. to be recording the information in the same capacity as you are selling it. You will of course also want to consider these expenses when you are calculating these renovations.