Make Money Real Estate Australia | A Guide to Buying and Selling Fixer Upper Homes

One way to think of OPM (Other People's Money) working for your benefit is think how most people expect to make earnings from fixer upper ventures.

First off, most people would want to purchase the property itself. They could do this through a couple of ways. They could purchase the land out of their savings or take out loans to pay for the property.

This method, while good in itself, has some limitations. If you use your savings to buy property for a venture - and for some unforeseen reason, the venture goes bust and you are unable to sell the property, then you may have practically thrown your life savings out the window.

You can make other people's money work for you here. For example, what if you take a 95% seller's financing plan. This means you only pay for around 5% of the property's value. Then, you proceed to lease the area to tenants. The money you make from the rentals can be used to pay for the loan.

In the end, theoretically speaking, you would have only paid 5% cold cash for the property, and made the property itself - with the help of its tenants - pay for the property the rest of the way. If the property costs $100,000, then that means you only pay $5,000 to own the property after some time - with extra income to boot. Not a bad proposition now, is it?

This is, in effect, having other people pay for something you will own in the future, and is one of the smart ways to make investments.

You could also use other people's resources such as time and expertise when trying to make money from fixer upper homes. For example, if you aren't well-versed in renovating properties, why not have other people do it, and make a profit at the same time.

How? Take for example a home that is sold by a distressed owner - house unkempt, needing repairs. Now, as a fixer upper yourself, the first thing you would want to do is think of how you can purchase and renovate the place, and then sell it on the market.

But what if, instead, you make plans to purchase the property and then show the property to other fixer uppers who may want to the take the property from your hands and do the hard work of renovating and selling the property on the market.

You can then sell the property again to this partner and have them renovate and sell the property. Just don't forget to take your profit from the pay you will be asking of them for the property! This, in technical terms, is called flipping.

If you look at it closely, you will have had made somewhere close to what most people in the same business make without even having to do the hard work required of them - remodeling, renovating, and marketing.

The technique there, however, is that you will have to be aware of how to choose potentially great properties. If you have an eye for that then it won't be much of a problem.

If you do this, you will have effectively used other people's expertise and time in helping you make a good profit. This is a great way to leverage other's assets to work for your advantage.

In the real estate business, a fixer-upper can be a smart way to get started in the business and earn good money at the same time. Buying and selling fixer-uppers, when done with discretion and with good buying judgment, can prove to be a good way to earn money without having to invest heavily - especially when done right.

When starting out in a fixer-upper business, you will first have to consider many things. After learning what you can, then proceed to drawing realistic expectations and plans to put your business into action. From here, you can then set goals and work on plans to meet those goals. While fixer upper business is attractive, high-income ventures, if not done properly, can drive one into serious debt if not done properly.

What is a Fixer Upper?

For those unacquainted with the term, fixer uppers is real estate bought from distressed home owners, fixed up (hence the term fixer upper) and sold at premium prices. In a way it is like finding a jewel in the rough, polishing it, and sending it back to the market for a good price.

Many have gone on to be millionaires from this kind of venture. If you look at it, theoretically, it makes a lot of sense. However, no matter how attractive it may seem to be, this type of business isn't without its risks.

Fixer Uppers involve a lot of money, assumptions and risks. You assume that the real estate you are buying can be fixed up and sold at a higher price. You also assume that the house can be brought up to a state where it is attractive to those seeking a home to move into.

If you put all these intangibles together, you will find that the risk may be a little too high for some people. In fact, this is the reason that these ventures are high-profit ones, they are also high risk.

You can, however, reduce this risk by doing good background studies, setting realistic goals, drawing up good plans, and making calculated risks. Here are some good tips on building a good fixer upper business venture.

1. Goals - You will have to set realistic goals for your business. Fixer upper homes can earn a good deal of money, but it wouldn't hurt to set a conservative figure as you learn the ropes. Sometimes conservative is good - especially when you are just starting to get the hang of a venture.

Some people set unrealistic goals, like aiming for $100,000,000 at the onset, hoping against all hope they can make and sell at an incredible rate. However, it would be better to keep with a realistic figure. Most fixer uppers will agree that $100,000 is a good amount to expect per year in a fixer upper venture.

This figure is taken by considering the sale of 5 fixed up houses with a cut of $20,000 per house. This isn't a bad figure to start with. And you will be able to adjust better figures as you learn more about the business.

You will also have to consider what this business will mean to your life. Will you give up your day job just to focus on this business? Will you do this on your own free time? Or will you try a little of both to see where you do best?

2. Properties - Make sure you don't put all your eggs in one basket. This could lead you to losing more than you are willing to in one venture. Depending on your source of financing, you could handle one or more properties at a time. Again, it will be advisable to start slowly before gradually increasing the number of properties you handle at one time.

3. Sell or Keep - Some fixer uppers will decide to fix and keep, instead of fix and sell. This is not folly, but shouldn't be performed without prior thought. If, with your research, you learn that the property rates for a given land ameliorate pretty quickly per annum and that you stand to earn more if you hold the property for a while, then do so.

If you see that you don't stand to earn much by keeping it, then put it on the market as soon as you see fit. On the other hand if you notice that prime property is creeping towards the property you are fixing up, holding on for a while might not be such a bad idea.

A Fixer Upper business venture could very well be your way out of the 9-5 day job. Not only does it hold the possibility of earning more, it also gives you a good opportunity to manage your own time, travel and meet new people. Plus, the extra money doesn't hurt.

Those that have become rich as a result of fixer uppers testify to the fact that while it can be a little risky, especially at first, it could be well worth the sacrifice and the risk. It is a very attractive, well-earning business with a very good rate of return.

Depending on how your business is financed, buying and selling properties may involve either very little or a lot of money. One good way to leverage your interest is to employ the use of other people's money.

Any successful fixer upper will tell you that the secret to success is the knack to find good properties that are seemingly un-sellable, but when fixed up can actually fetch more than its weight in gold. While some have an almost preternatural ability to nose up such properties, there are ways that everyone can learn to sniff out good property buys.

1. Doghouses - the term doghouses come from homes that aren't structurally damaged, only unkempt and needing cosmetic upkeep. Some homeowners have good sound homes but neglect to do simple things such as clean the confines, plaster the wall with paper, and keep the roof in good repair and such.

These houses may be in such a condition because the owners are both lazy, in dire financial straits and unable to maintain their homes, or planning on moving anyway. In such a case you will want to inspect the home closer, you could be in for a pleasant surprise.

If you spot such a house, you will do well to investigate more since you have, in front of you, a good chance of snagging a diamond in the rough.

Owners of such houses find it hard to sell these houses even if there is only minimal damage. This is because they are unattractive and people tend to have the inability to look beyond minor faults to find a good sturdy house standing in front of them.

2. Look at the Neighborhood - Do a little research on the neighborhood to find out if the area is a booming area worthy of prime property prices. Some properties, no matter how wonderful they may look like, can't fetch good prices because they are in bad neighborhoods, or are in areas that are underdeveloped.

Ask around the neighborhood for signs of improvement in the last few years. Check out the amenities of the area, the community support, and the general impression of other people on the neighborhood.

Good house hunters are able to catch a good neighborhood on the rise, just along the time when property space is cheap and right before the area experiences a boom in property prices. Other things to ask about are crime rates, accessibility, proximity to hospitals, schools, and other community fixtures.

3. Ask the Mayor - If you have contacts, it would be nice to know the government's plans for the area. If the government plans to develop the area, create higher class amenities and housing then there could be a sudden surge in the prices in the area. This is then a good time to catch the wave before prices skyrocket.

You could also research plans for companies and consortiums to develop malls, transportation, and other facilities. These could radically affect the prices in the area. If you are able to anticipate this ahead of time then you are in line to make good money from this business.

4. Crime - Crime and community is a major factor in the choice of a home. Make sure that the properties you put your sights on have low crime rates and have a strong sense of community. This means that the people in these areas should get along with each other. This is a very important aspect of the choice of home for most people.

For most people, seeking financing for fixer upper ventures will prove to be one of the hardest things to consider. Some of those that have been able to save up might consider plunking in their savings into such a venture.

However, this would be tantamount to putting all your eggs in one basket. If you lose the basket, there goes your future. And that would be financial suicide, by any measure.

If you are looking for good financing schemes for your fixer upper here are a few good alternatives.

1. Housing Loans - The US Department of Housing and Urban Development 203 (k) rehabilitation mortgages is one of the best solutions if you are looking for a single, low-interest solution to purchasing and fixing up a home property with one loan. This is a great alternative to taking out multiple higher interest loans that could cripple your finances - you can instead have just one loan that is decidedly easier to pay off.

While this is a great alternative to other loans and mortgages, it does have guidelines. For one, it is subject to guidelines submitted by the Federal Housing Administration - these guidelines may also vary from state to state.

For example in order to be eligible for this loan, it has to have improvement costs of at least $5000 for a one to four condominium or family residence unit. After eligibility, the loan then becomes available with wonderfully low interest rates for terms as long as 30 years!

And to top this, you will only have to pay about 3 percent down payment if you are an owner or occupier, and 15 percent if you are an investor. It is also available is you want to finance the repair not only of properties you don't own yet, but properties that are already in your fold as well.

2. Other lending instruments - You could also use any number of lending instruments available to you. Mortgages or second mortgages are common among those that purchase fixer uppers. Some also pay visits to their banks for loans.

In some cases, seller financing provides a better alternative to other loans. Other property managers themselves can finance the purchase of their own property, with you plunking down as little as 5 percent of the total price. This method is more amenable to people than having to pay the whole thing out of their own pocket immediately.

In any case, on should find a financial instrument that is acceptable and payable in agreeable terms since not all available financing options are practical or useful for your purpose. You should keep a look out for low-interest, long-term loans that are available.

Of course, such attractive loans are only available on certain conditions. And to get the better deals, you will have to fall under attractive brackets.

3. Getting Better Loans - If you want nice, low-interest, long-term or short-term financing, you will have to be an attractive client to most banks. For you to fall under the 'attractive client' bracket, you will have to have your financial house in order.

If you have bad credit history - having debts left and right and defaulting on previous loans, then you will probably have trouble getting good loans. For such dire situations, the only opportunities that present themselves at this point will be high-interest loans.

While some people will be glad to have someone offer a loan at this rate, you should always remember that every percent counts. And that every percent could very well spell a few more hundred or even thousands of dollars in payments yearly. You, in the eyes of lenders will have become a high-risk client, which warrants the increase in interest you will be experiencing.

The best way to get attractive loans is to get your financial house in order before setting out for available financing. Without such measures, you will end up with financing that may be too hard to handle.

In a nutshell, the best way to get into the good graces of the lenders is to pay off existing debts (or to at least settle with previous lenders for a payment plan), and to avoid getting into new debt immediately.

There are many forms of financing available, each with its own idiosyncrasies. Study all the terms of these loans before entering into them and learn how each one fits your current financial situation before considering any one of them.