Investing in Fixer-Uppers

Can you make money buying, updating, and selling fixer-upper properties? Yes, but. Here, some who have tried it share what they've learned. February 17, 2006

Question
I am wondering if any of you buy fix and sell homes. I own a wood shop and we build kitchens, baths entertainment centers, etc and I am looking for ways to be able to produce woodwork without having to sell it to a customer. It would be so much easier to buy a home such as a condo or townhouse and go in and do the mouldings, bath cabinets, kitchen, etc and then sell it.

I build furniture but am learning that designing it and selling it is close to impossible with all of the furniture shops there is and building for designers gets irritating. The point is that I want to be the designer and the builder and do it without worrying about what the customer would want. Does anyone have any thoughts or is anyone doing it successfully?

Forum Responses
(Business and Management Forum)
From contributor D:
Finding a home that is "structurally sound" and livable in a good neighborhood at a good price (basically below market because of its untidiness and minor problems) is quite possible. A friend of mine does this, and then moves into the home. While living there he improves the home in many ways using his construction abilities. Once the home is improved, he sells it and moves on.

A woman I know recently bought an older home and only painted it inside and out (her and her kids) then resold it at a 20k gross profit. It all happened in 4 months. One must buy smart, have the ability to improve it themselves without hiring trade labor then patiently market it. Know what not to tackle but what problems to take on. It seems being patient and knowledgeable is as important as having the fix up abilities.



From contributor T:
If you can find a builder that will build an investment property for you and leave the inside unfinished, you can do all the finishing yourself. You can also be the contractor and make an extra 20-50 thousand when you sell the property. Furthermore you can have the property sold even before you build and allow the customer to their own finishing. It's good to do once in while but then you get caught up in it and wind up becoming a contractor like a friend of mine did. I usually do one property every 3 years or so and it helps a great deal.


From the original questioner:

My intention is to buy and then do finish work only - this means crown moulding painting walls, and even wainscotting. I would make the decision when I found the right property as to whether I wanted to replace the cabinets or just reface them. My motive here is to make a living without someone telling me what they want or that something isn't right. I'm not looking for a place where I need to rebuild the whole thing such as roofing, flooring and etc.

I'm a cabinet/millwork guy not a general contractor. I love to do woodworking and if I could work in a house doing it my way, my color, etc I would enjoy it a lot more then someone telling me right from wrong. Typically they're wrong and it ends up being my fault. Every shop owner knows how that is. I am planning on running my shop for regular customers until I get this thing going so that is how the income will be flowing. I don't intend on dropping everything, buying a house, fixing it and then not doing anything until it sells.



From contributor G:
You need to know about almost everything - framing, plumbing, hvac, electric and etc. If you do want to pursue go to the paper and find the most successful real estate agent and listen to what they have to say or you could find another rehab/renovator as a mentor. I have been renovating houses in Nashville for the last 10 or so years and have made very good money.

Lets just say that rehabbing houses (for someone who knows that business) is easier and more profitable than a novice to the cabinet business. I now have the utmost respect for anyone in the cabinet/millwork business that makes a living. FYI - I can not really afford to use my own shop for most of the work I do and I am doing 500,000 to 1,000,000 dollar houses. With one exception all have sold before I finished. Subs are less expensive because they are more productive.



From contributor D:
Keep in mind that those who have made a lot of money in real estate in the last ten years have been riding the biggest real estate bull market since the depression. Historic gains have never stayed that high and history doesnt do well for those who buy at the top of the cycle.


From contributor T:
The most profitable houses that I have flipped have been ones that needed kitchens and bathrooms but I did buy a single dwelling home once for $260,000 and all I did was sand the floors and stain them darker as well as paint the whole place and add crown mouldings. The selling price was $310,000. This was the best deal I have ever made. You are on the right path and you should only listen to people who are where you want to be. My advice is that you need to do whatever work there is fast because every month dips into your profit.


From contributor N:
I have been in business with a real estate broker for the last 8 years doing what you are talking about. I am a general contractor. The way I work it is my partner puts up all the money, I either do all the work, or sub some of it out, and we split the profit when it sells. Another way of doing it by yourself is buy HUD homes. These are homes that didn't sell at the foreclosure auction, the government gets them back and you can buy them through realtors that specialize in these. These houses you can get financed and sometimes even get money back for repairs from the government.