The. colorful and most unlucky bank robber, Willie Sutton, was once asked — Why do you keep robbing banks when you always get caught and tossed right back in jail? Willie’s reply — “Cause that’s where all the money’s at!”
People often ask me why I still keep fixing rundown houses when I obviously have enough money to buy more attractive and cleaner properties. My answer is just like Willie’s — Cause that’s where all the money’s at!
REMEMBER – IT’S THE BOOKS “NOT THE LOOKS” THAT COUNT
Folks who have little experience in the fix-up business will often incorrectly judge a property by how it looks rather than by the benefits it will provide. You should Stop and ask yourself every now and then, what am I doing in real estate? Do I want properties that look good? — Or do I want properties that pay good? There must be no confusion about what your goal or purpose is if you wish to be successful.
One of my first recommendations, especially for new investors, is to sit down and plot out exactly how much money you’ll start getting back each month, once you become the owner of a property. Do this exercise before you buy – not afterwards! People who purchase single-family houses often skip over this drill. If they were to “plot out” negative cash flows month after month on a sheet of paper where they could stare at the depressing negative numbers, I’m sure many would avoid the heartaches of doing “dummy deals”.
FIXING UP HOUSES – EQUAL OPPORTUNITY FOR ALL
After doing fix-up for so many years – I must make a confession! Fixing is much more satisfying and rewarding to me than buying the newer sweet-smelling more expensive houses, although I do own some now. Let me simply make this observation about newer houses. They provide an excellent vehicle to reduce excessive cash flow. Also, if you have a problem with too much cash stacking up in your safe deposit box. Newer houses, with high monthly mortgage payments can quickly eliminate the problem.
Someone recently reminded me that newer properties have other qualities just as important as cash flow! They instill a great sense of “ownership pride”, they told me. I’m a bit reluctant to buy that argument, but I will concede that money’s not everything, so let’s move on to some other stuff!
There are those who incorrectly believe that fixing houses is a job that only experienced carpenters or contractors can do. Nothing could be further from the truth. Almost anyone can do this job. In the final analysis, it matters very little who performs the physical “fix-up” work, so long as the right things get done.
Owners doing their own fix-up work will only enjoy a money saving advantage, if they fix the right things at the right time. Both are very important. As you shall learn KNOWLEDGE is what makes the big money. Swinging a hammer or swishing paintbrushes will merely earn you average wages or save a few bucks in the short run.
Frequently – two questions always “pop-up”. So let’s get them answered so they’re out of the way. First, does fixing up houses require any special licenses or professional skills? — And second, can women succeed in the fix-up business just as easily as the men can?
FIX-UP SKILLS EARN AVERAGE WAGES – KNOWLEDGE IS WHAT BUILDS FORTUNES
As a general rule, no licenses are required by owners who fix up houses for themselves. However, if you do it for someone else, for example; as an employee or independent contractor – that’s different! It’s very likely you will need a license to be perfectly legal. Remember, this article is not exactly the best source of information about doing everything perfectly legal after all, you’ve never seen a rich cop have you!
Having fix-up skills can certainly be an advantage because it’s one less thing you’ll need to learn about. But, having said that – I’m gonna tell you something you should definitely underline — And never-ever forget. It’s very important information because once you clearly understand and accept it; you can direct your efforts where the money’s at. BIG PAYDAYS DO NOT COME FROM FIX-UP SKILLS – THEY COME FROM REAL ESTATE SKILLS AND SPECIALIZED “HOW TO” KNOWLEDGE. When I first started out in this business, I had no idea how important this really is — Although now, it makes perfect sense to me.
To illustrate my point — Just think about all the thousands of licensed building contractors who can do almost anything to a building. They have plenty of skills! Now think about what most of them don’t have plenty of! If you answered money — You’re right! Believe me when I tell you fixing skills alone are not enough if you intend to make big money in this business. Don’t decide that fixing houses is not for you because you can’t stop a toilet from running — That ain’t where the money’s at! Let it run while I tell you what to do.
THE WOMEN’S ADVANTAGE SHOWS UP
Fixing houses is definitely equal opportunity! The job is not gender sensitive, with perhaps one small exception. I think women understand living space better than most guys I’m acquainted with. For example – cupboards and closets, cabinet space and electrical outlets in the bathroom. My male fixer team often ignores or overlooks the importance of these items. They are often called to our attention when a lady renter calls to complain about only one cabinet or not enough electrical outlets for all her bathroom goodies! Women seem to have a natural instinct when house remodeling is involved and I suspect this comes from their homemaking abilities. I have caught my fix-up crew building a bedroom closet just large enough for 3 wire hangers. Women fixers seem to know better than that.
CHANGING THE LOOKS ALWAYS ADDS VAULE THE FASTEST
It’s not by accident that I always begin my fix-up projects in the front yard. I’ve seen professional appraisers value identical houses as much as $10,000 difference because of plain old filth and junk on one property. In other words, a clean house is worth $10,000 more simply because the owner hauls away the trash and keeps the house looking nice. Think about that for a minute! That’s a lot of money for ordinary clean -up skills. Suppose it takes a whole week (40 hours) to haul away garbage and clean up a property — That’s $250 an hour, or nearly as much as a brain surgeon gets on his days off!
All fix-up work should pass some financial scrutiny! Does it really need doing? I believe most improvements should be justified on the basis of paying for themselves. I expect the payments to come from higher rents or bigger profits as my reward for doing the work. Fixing or changing things around purely on the basis of personal likes and dislikes will seldom provide a justifiable “mark-up” (profits). Those kind should be avoided. This happens to investors who quickly charge forward without a plan. It also happens to folks who fall in love with investment property. I advise -you. — Be very careful and avoid these common pitfalls. Remember, fixing up dumpy dirty houses is not glamorous work. But, if you do it right, it will pay you better than anything else I know of.
RENOVATORS – REMODELERS – THEY ARE A DIFFERENT BREED
I discovered there is no inexpensive method to turn older houses into new houses. Many amateur fixers try to accomplish this task only to find their bank account disappears faster than the house changes. Here-in lies the most important difference between what I do and what remodelers and renovators do. Believe me, it’s a very expensive difference too!
Often remodelers will replace entire plumbing systems with all new piping. Sometimes they have the entire house re-wired. They tear out old flooring and replace floor joists and girders. They replace wood windows with new metal frame styles. Some will even jack a house up to level it. That means they must also fix all the cracks and often re-do the stucco exterior. Don’t do fix-up this way. Unless money is not the object — You’ll lose your shirt if you do.
CREATING HOMEY ATOMSPHERE – THE SOLUTION
Since older houses are not the same as newer ones, don’t try to make them so. Instead, try to capitalize on the marketable features, not found in the modern day construction. Older houses quite often radiate charm — A homey feeling! High ceilings, woodwork, large porches, yard space, old windows (dressed up), evaporative cooling with separate heating, storage sheds and separate garages and more often than not, mature shrubs and trees. All these items can add to the charm of older buildings. Add a freshly painted white-picket fence after everything else is cleaned and “spruced up” — You’ll have lots of customers — Renters or buyers, depending on your investment plan.
When I talk about fixing for dollars, I’m primarily referring to what I call, “sizzle items”. Things like white-picket fences, fresh paint, window coverings, ceiling fans, wall paper, new plastic counter tops, (Formica), attractive floor coverings, planters, shower curtains, decorative porches or entrance doors, trees & shrubs, green lawns, new faucets, modern toilets and new plastic shower enclosures.
The reason I call these sizzle items is because they are attractive and eye appealing, as well as useful. Sizzle items seldom have anything to do with code problems. For example, old dingy carpet will pass a code inspection same as bright new carpets. Trees and shrubs have nothing to do with codes or safety and neither does curtains or ceiling fans. What these items have is lots of customer appeal. This appeal translates into big dollars at the box office, aka (my rental office). The very same appeal makes selling your properties much more profitable because they look better.
PROFITABLE FIXING BOILS DOWN TO – WHAT’S IT COST
Since almost every problem can be patched-up, repaired or replaced by skilled mechanics, it becomes necessary to further qualify fix-up work in terms of the economics, “How much will it cost?” This information will help you decide how much work is too much — And when it’s best to simply pass over the deal and move along to the next on. The fix-up-investor must be concerned with fixing for profits. Not just fixing. This is a very important concept — One you must never forget. The two worst mistakes for beginning fix-up investors are OVER-FIXING and FIXING THE WRONG THINGS.