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Published by: Craftsman Book Company Step-by-step instructions for selecting, repairing, improving, and selling highly profitable "fixer-uppers." What Property Is Best for You? 12 Visiting a Real Estate Office, 28 FSBO vs. Real Estate Agent, 38 Selecting an Agent to Help You, 41 What Your Agent Can Do for You, 44 Conducting a Thorough Examination, 47 Getting the Financing You Need, 57 A Little Background on the Industry, 58 Lenders and Real Estate Investors, 59 Repairing Structural and Mechanical Problems, 102 Working with Water Damage, 105 The Living Room, Dining Room and Bedrooms, 126 The Kitchen, Bathroom and Basement, 148 Improvements That Pay Off, 172 Making Better Use of Space, 173 Simple Modifications with Appeal, 173 When to Do Major Additions, 180 Specific Decorating Considerations, 207 Landscaping and Garden Décor, 217 Choosing Your Interior Décor, 223 Windows and Window Treatments, 231 The Living Room and Dining Room, 237 Pros and Cons of Using an Agent, 260 What If Your House Doesn't Sell? 277 Advantages of Rental Property, 282 Protecting Your Investment, 284 There are probably as many ways to make money in real estate as there are people in the business. It's an enormous field, with many occupations and hundreds of specialties. All offer opportunities for those who know how to take advantage of them. So what could I possibly offer that's new, that you haven't heard before? If you're interested in remodeling homes that you've bought for resale, this book is for you. My approach is simple, it works, it's low-risk, and it pays well. It's even fun - most of the time. I'm going to explain in detail, exactly how I make a good living in this business. I've learned a few things in the last 12 years. I've made some mistakes, taken a few wrong turns and stumbled more than once. But I've got most of the kinks out now and I see opportunities almost everywhere, in every part of the country, in hundreds, maybe thousands of communities. What I do isn't unique. I think almost anyone could do it. Of course, it helps to know something about building and construction trades. I worked as a tradesman before quitting to do the work I do now. But if you’ve got some background in construction, a little cash, and are willing to get your hands dirty, this may be a good-paying career for you. On the chance that I’m right, I hope you’ll stick with me long enough to consider my approach. Most homes are remodeled either by professional builders working for the owner, or by an owner who has the time and talent to do the work. Both the talented amateur and the professional remodeler have the same goal in mind - creating the nicest home possible for the owners' use. And there's nothing wrong with that - an owner with the desire and money to pay deserves as much. If you're like most people, you're willing to spend more when it's you that gets the benefit. You want to please yourself and your family. The little extras in your life are worth the cost. "Who cares if the sink costs $2,000," you say. "It's exactly the one my wife wants." My approach is different. As I said, I'm an investor/remodeler. My focus is minimizing the inputs to maximize the output. I've discovered that doing more work doesn't guarantee that I'll make more money. On each home I fix up, there's a point beyond which the cost of additional work can't be recovered on sale. Knowing how much to spend and where to spend it is one of the secrets I’m going to share with you. Knowing what I know makes me less work-oriented than most remodelers, whether professional or amateur. It also affects the focus of this book. Most of the remodeling books I’ve seen approach the subject from the point of view of the work to be done. The authors assume that you have to work more to make more money or make the home more attractive and functional. The harder you work, the better you’ve done. That isn’t what I’ve learned. Another reason you may want to try my approach is that I'm writing from experience. Many books are written by people who don't actually do the work they write about. They just like to talk about it, or maybe they just like to write books. They sit at their word-processing terminals and write about the way they figure it ought to be, or the way they imagine it is. There's little first-hand information in books like that. It' s possible to write a book from what you learn in books or magazines. I haven't done that. What you find between the covers of this book is all original and all based on my own experience. With very few exceptions, I'm only going to tell you what works for me - and sometimes about what didn't work for me. I'm not going to recommend anything unless I've tried it and know it works. And for good reason. Even some of my best ideas turned out to be flops. There are a couple of exceptions that I couldn't resist. But I'll clearly identify them as possibilities you might want to consider - not what I'm recommending. The first subject we'll cover is how to select the right property. This is probably the most important part of the entire process. I'll suggest a procedure for evaluating the properties available and the criteria you'll use when making the final choice. Once you have the property, what should you fix and how should you fix it? I’ll go through most of the common repair problems you can expect to run into, and suggest some good ways to deal with them. What about improvements? How can you bring your run-down, out-of-date house up to the standards we've come to expect in a modem home? Improvements can be very expensive. Some are worthwhile and some are a waste of money. I’ll help you decide which is which. Nobody likes an ugly house! How can you make your house beautiful and desirable, so it brings top dollar, and yet not spend a fortune doing it? I'll explain inexpensive ways to turn a sow's ear into a silk purse. Now that you know what's ahead, let's get started. I hope you're ready to charge into the world of real estate and find that diamond in the rough just waiting for you to come along. I believe the surest way to make money in real estate is to pick one type of property and specialize in it. There isn't one real estate industry in America. There's a million of them, one in each neighborhood and within neighborhoods, one for each type of home. It's impossible to know about every kind of property available on the market in every community. There are just too many. My specialty is single-family homes located near the community where I live. I don't do commercial property, I don't do multi-family, and I don't do construction contracting. I work in big-city suburbs, not small towns or resort areas. My answer is a resounding "YES!" and for a number of reasons. I’ll explain them one at a time. If investor/remodelers are active in your community, most are working this way. Many real estate investors make a good living like this. If you don't have the time and don't know anything about construction, maybe that's all you can do. Projects are being done this way every day and in every part of the country. I guess that proves there's plenty of profit in it. William Nickerson, the famous author of real-estate books, suggests exactly this approach. He hires everything out. His book, How I Turned $1,000 into $1,000,000 in Real Estate, is a classic. The information in the book is as valuable today as it was when it was written in 1959. It's one of the few real-estate books that I recommend. I've said that there's good money to be made in this business. So why don't I hire tradesmen to do all the work? Here's my answer: Absentee investor/remodelers lose control. They aren't there to make the thousands of decisions that are required for every job. They pay too much for supervision, for materials and for labor when they rely on someone else to do the work for them. My advice is to do what you can and what you enjoy. You’ll end up putting far more profit in your pocket. If you're a contractor or a tradesman, you'll have slow periods. There won't be enough work to keep you busy. If you've ever watched your bills pile up while you wait for work that doesn't come in, you know what an uneasy feeling that is. Remodeling your own houses can put an end to that feeling. You create your own job and you're your own boss. You can plan your work to stay busy for weeks or even months at a time. That's exactly what I do. My rental property provides the income I need to cover my monthly bills. I use the profits from the properties I fix up and sell for spending money and new investments. Even if I don't do any work one month, my expenses are paid and I'll still be able to eat. When you're self-employed you don't get sick days, vacation days, unemployment compensation, or any of the other fringe benefits that make life more secure. However, rental income goes a long way towards solving that problem. If you don't work you'll make less money, but you won't starve. Other professions- If you're a tradesmen or handyman, you may never have been your own boss before. It's a rewarding experience. I spent several years of my life working for other people. I know what it's like to do seemingly pointless tasks because someone higher up has a crazy idea. I also know what it's like to have valuable, creative projects rejected. Well, as your own boss, you don't ever have to put up with that. Sure, being the boss can be a headache at times. You have the final responsibility for everything, and sometimes it won't be pleasant. If there's a job that's so nasty and disgusting that I can't even pay someone else to do it, guess who gets stuck with it? And if I don't make as much on a project as I expected, there's no one to blame except myself. However, just being able to say, "We're going to do it my way, because I'm the boss," makes it all worthwhile. Maybe you feel the same way. While the building code and zoning ordinances vary from city to city , property owners have less restrictions than hired contractors. Most laws, after all, are made to protect the property owners. You only have to worry about the codes which will protect you from yourself! As an owner, you won't need a contractor's license to work on your own property . You will need to get permits for major work, and your work will still have to pass inspection. But many cities issue "owner permits," which are usually very easy to get. A lot of the work you'll be doing may not involve any paperwork at all! As a contractor, you' d need a briefcase full of plans and permits to do any work at all. Many cities require general contractors to use subcontracts for trades like plumbing and electrical work. But many of those same cities will issue you an "owner permit" to do the work yourself. That can save you a lot of money. Of course, you' d better know what you're doing (for your own safety, and to pass inspection). Subcontract anything that's over your head. You're not going to lose anything. You'd have had to do that as a contractor anyway. Another advantage to being both the boss and the owner is that you can organize the work to suit yourself. For instance, you can hire out jobs you don't particularly like, and just do what you enjoy (most of the time). You can do the work in any order you like, although you have to be practical. Some jobs have to be done before others. You wouldn't want to lay carpet before painting, for example. But in most cases you can do what you want, when you want and the way you want. You'll probably pay less tax on profits from the sale of a house than you would on equivalent income as an employee. See Figure 1-2. The tax benefits are even better with rental property. If you rent a house out, your profit is distributed over many years. If you're on the border of a higher tax bracket, this can be very helpful. Even more helpful is your depreciation allowance on the property. You can deduct a percentage of the cost of your property as depreciation, even if the property's value is going up! The maximum allowable depreciation on rental property at the time of this writing is roughly 3.4 percent per year. The cost of the building can be depreciated over no less than 29.5 years. But I have properties that are increasing in value about 20 percent a year. Yet I can still depreciate them by 3.4 percent a year! You won't be taxed on the appreciation (which is your profit) until you sell the property. That's a good deal. Not as good as it was before the Tax Reform Act, but still good. With rental property you can make a very good income year after year and pay little or no tax at all! You get to keep your money, instead of giving it all to Uncle Sam. There are very few businesses where you can do that . . . legally. I'll go over this in much greater detail in the section on "Rental." I hope by this time you're beginning to see the possibilities. The purpose of this chapter is to whet your appetite for more. And, of course, there's plenty more - more to learn, more opportunities to recognize, and more pitfalls to avoid. If you're ready to dive in and begin at the beginning, go on to Chapter 2. (Profits in buying & renovating homes - "how to" was posted and is owned by: Shauna Patton) |
s.patton@chicagopartsnetwork.com (Shauna Patton) for more information.
