If you've never heard the term "fixer-uppers" before and aren't sure how they could possibly equate with striking it rich, read on for some useful information about the exciting world of real estate investing.
Combing through the real estate section of the newspaper or through one of the many sites online devoted to selling homes, fixer-uppers are those properties that are often advertised as, "Needs TLC," meaning, it needs some tender loving care in terms of making some repairs and improving the home's general appearance.
What most people aren't aware of is that fixer-uppers have the incredible capacity to becoming moneymakers, generating a much larger profit than a property that was already in good or excellent condition when you, the buyer, came along. After making some inexpensive repairs and a giving the property a quick makeover with new carpeting, paint, or any of the other little things that greatly improve appearance but don't require a lot of money, fixer-uppers are resold for substantially more than you originally paid, giving you a hefty profit to enjoy and even reinvest.
Since most of these homes or buildings are in need of some type of maintenance or repair, it's much easier to negotiate with sellers in order to get the lowest price possible. And, most people are looking to buy homes, then move right in without being bothered with repairs or matters of aesthetics, opening up a world of possibilities for you the investor.
Joint Ventures? Good or Bad?
You're probably already familiar with the term joint venture, which is an equal partnership between two entities working toward the same goal, but how do they work as far as real estate is concerned, and are fixer-uppers something that would fall into this realm?
The first and most important aspect of joint ventures is that they be legally binding, with the terms spelled out in the form of a written agreement detailing each party's responsibilities and what is expected of them. In many cases, a joint venture consists of one party supplying the funds in order to get the project off the ground, while the other person does all of the actual paperwork, legwork, and the handling of the details. The aforementioned legal agreement should also list the split of the profits to ward off any complications or conflicts in the future.
If you're a beginning investor with plenty of cash or equity available, but no borrowing capacity to speak of, a partner just might be the ideal answer. Likewise if you have the ability to borrow, but no cash or equity for a down payment, or if you have the know-how but no funds to back it up, a joint venture buying fixer-uppers and reselling them for profit might be something to seriously consider.
On the other side of the coin, any time there are more than one set of views or opinions involved, there's bound to be a disagreement or conflict of interest somewhere along the way. Which is why having everything in writing beforehand is so very important, even if you're getting into a project with a friend or family member and can't foresee any problems arising, as it's better to eliminate the risk now and concentrate on making money and enjoying your experiences.