8 Steps to Making Huge Profits on Investment Properties.
Here is the complete formula for making sure you make profitable purchases for fixer properties. These simple 8 steps will ensure you never pay too much for an investment property again.
SPECIAL REPORT:
8 Steps to Making Huge Profits on Investment Properties.
Buying properties that are in need of repair is one of the quickest ways to make money in real estate in the shortest period of time. These properties are known in the industry as “fixers,” “ugly properties,” or “junkers.”
But beware! I know too many stories of new investors that were too anxious to get into a deal and paid way too much for a property. The last thing you want to do is overpay for a property and create a massive hemorrhage in your cashflow.
You need to understand that you actually determine your profit when you purchase the property. It is easy to guess that you have a bargain, and later find that you wound up with a money pit because of lack of homework before making your offer.
So let me give you the 8 steps to making massive profits on fixer properties. These simple steps will give you the formula to make sure you consider all your costs before making your offer
Step 1
Determine the after repaired value
You actually have to start with the end in mind. On any property that you are making an offer on, you first need to determine what you can expect the property to sell for after it is fully repaired.
You can ask your friendly real estate agent or title company for comparables in the neighborhood. Just make sure you are comparing apples to apples. You want to compare your investment house against very similar properties.
If you have a 3 bedroom house with 1500 square feet find at least three other houses that are similar within the same neighborhood (or a very comparable neighborhood) that have sold in the last six months.
Step 2
Determine your closing costs on the purchase of the property
There can be a lot of costs that can add up when you are closing on a property. Here is a list of things to include in these costs.
- Down Payment
- Real estate commission
- Appraisal
- Loan closing costs and/or points
- Home inspection
- Termite inspection
- Soil inspection (if there is an underground oil tank, etc.)
- Finder fees (for anyone that may have helped you find the property.)
- Survey
Step 3
Determine your holding costs
A lot of investors can loose profits by underestimating their holding costs. Make sure to include the following:
You need to add in 6 mortgage payments to the holding cost budget. You want to have plenty of money set aside for the time it will take to repair and market the property.
Make sure to include 6 months of taxes and insurance as well as utility costs for 6 months.
Step 4
Add up your budget for repair costs
If you are not good at estimating what repairs will cost get some estimates from contractors. You want to make sure you include everything from carpet, paint and light fixtures, to plumbing electrical and landscaping. It is better to go over on your estimate rather than to underbid what the overall costs will be.
When you think you have estimated what your repair budget is add 10-20% to this total. You may not think you need this extra cushion, but more times than not you will end up going over budget on a rehab project.
Step 5
Determine sale costs
Now you need to determine what it will take to sell the property. Take into account your advertising and marketing budget
Step 6
Determine closing costs on the sale of the property
In step 2 you determined the approximate closing costs on the purchase. Now determine the same thing for the sale of the property. Include any points, real estate commission, etc.
Step 7
Decide on your profit.
This is the fun part. Here is where you decide on how much money you want to make on the property. Remember, you control how much profit you make not the property.
Remember that you are going to be investing a lot of time into this property over the coming weeks and months so make sure you are naming a figure that is worth your while.
I wouldn’t settle on less than $15,000 minimum for a profit on a fixer property. Even with all the figuring you have done, your profit can still get eaten away by unseen issues that can come up with the property, especially if the rehab and sale takes longer than anticipated.
This is the main reason we start with the end in mind. Do your best to look at this as a math formula. Leave your emotions behind when you get to the end of the formula you have your answer on what you can afford to pay for a property.
Step 8
Determine what the most you can pay for the property will be.
Now we are ready to determine what we can afford to pay for the property.
Simply take your predetermined after repaired value and subtract the following:
- closing costs on purchase
- holding costs
- repair costs
- sale costs
- closing costs on sale
- your profit
What you are left with is the MOST you can afford to pay for the property and still make the profit you are looking for.
This formula takes a little time, but the more offers you make, the quicker you will get at compiling the data and making lots of offers.
We sincerely hope this article was of value to you. If there is any way we can be of service, please contact our office. We would consider it a privilege to be of service to you! If you would like a FREE consultation, call me, Nedalee Thomas and the TNT Dynamite Results Team toll free at 877- LIST-TNT that’s 877-547-8868.
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Sincerely,
Nedalee Thomas