Purchasing a run-down house, then fixing it up to be a desirable home or rental is a type of conversion. Let's say you
purchase a house for $75,000 with a down payment of $5,000. You know that after replacing the carpet and applying a fresh
coat of paint inside and out, you can sell this property on installment for $90,000. Thus, figuring about $2,000 in renovation and selling costs, you earned about $13,000 in the
markup over the purchase price.
But that's only part of the good news. If you can purchase the property by taking over existing low-interest financing,
you can increase your profits further with a wraparound loan, described in the next chapter. This is the essence of the fixer-upper conversion. Not only do you convert an undesirable
house into a desirable home, you also use a wraparound loan to gain on the spread in rates of interest.
In a fixer-upper conversion, you'll have to decide whether to do the repairs yourself or to hire the job out every time you
buy a fixer-upper. That decision depends on whether you're a handy person and whether or not you have adequate fix-up
money to pay for professional labor. If you have plenty of cash and can't spare the time to do it yourself, then hire the work
out. But, if you're like most of us, always scraping for a buck and wanting to earn some "sweat equity," then you'd be wise
to do most of the work (within your capabilities) yourself. Personally, I enjoy the cosmetic work--the painting and
wallpapering, and sometimes laying down a beautiful hard-wood floor. When I do hire the work out, I make a point of watching what's being done and asking plenty of questions,
Then, next time, I might be able to do the job myself.
If you do decide to hire a contractor, follow these guidelines:
* Discuss the job you want done with at least two contractors and get written bids for the work.
* Talk to your neighbors. Ask them if they can recommend someone. Good crafts
persons build their business on their reputation. Satisfied customers will be your best guide to
reputable contractors.
* Get at least three references from the contractor and check them out. Call each one; ask whether there were any problems and, if so, whether they were corrected. Also find out
if there were any extra charges and whether the work was completed on time.
Doing It Yourself
Especially if you do the work yourself, remember that the best fix-up properties are those that simply need cleaning up and
some cosmetic work inside and out. Try to avoid getting involved with extremely old
house that require a new roof, new plumbing, or new concrete. These are problem areas that
usually require a specialized contractor and plenty of cash.
Unless you can do some of this work yourself, stick with properties that require only some tasteful painting and wall-papering, and
perhaps, a new carpet. In painting the interior, select latex paints, because they're
easy to apply, can be thinned and cleaned up with water, dry quickly, and have little or no odor. Flat latex is best for interior
walls and ceilings.
Before you start the job, make sure you have all your paint supplies. You can save money by purchasing five-gallon cans
of paint instead of single gallons. Careless painting wastes time and can be a messy
experience. Proper surface preparation is necessary to do the job right. Wash the walls and woodwork with soap and water. (Paint adheres better to a clean, nonglossy finish.) Fill all
cracks and holes with spackling. Let dry and sand down. Remove all fixtures, electrical plates, and switch covers from
surfaces to be painted. Then cover everything with drop cloths to protect the furniture and the floor. Apply paint to the
ceiling first, then the walls; finish up with the trim and semigloss work.
In most cases, fix-up properties will require you to dress up the exterior grounds, particularly the front of the house to
make it more appealing. Keep in mind that first impressions are lasting ones. If a prospective tenant or buyer drives up to
inspect your property and the grounds are shabby, the prospect is likely just to keep driving without further inspection.
However, if your lawn is well maintained and tidy, a prospective buyer or tenant will decide that the entire property
deserves further attention.
When you're dealing with fixer-uppers, nine times out of ten it will be necessary to replace the carpet after purchasing
the property. When it's time to consider the purchase of new carpeting, do some shopping around to get a good price. The
carpeting industry is highly competitive, and you will find many suppliers to choose from.
Wall-to-wall carpeting, especially if it's new, of good quality, and chosen in good taste, will give your units a special
glow of warmth and luxury. Stay with light colors, like tan or beige. A light gray is also very nice, and it suits almost any
furniture decor.
