How would you like to use fixer-uppers as a means of creating and enhancing equity in your investment opportunities? While it is possible to find properties under market and then resell them at a higher price, creating and enhancing equity makes potential properties even more profitable.
Fixer-uppers are a valuable component to any investor’s arsenal of profits. Most people think that fixer-
uppers are a process of finding distressed homes, adding new carpet and paint, and then selling for a profit. While this is true, it is also a very limiting view of an amazing process. Once you understand
what fixer-uppers are in their glory, there is so much more you can do.
A fixer-upper by definition is anything you do to a property to make it more valuable. You may ask, “What is the formula for a successful fixer-upper?” and “What are all the things that I can do to properties to make them more valuable?”
To answer the first question, the formula for a fixer-upper is very basic and simple. First, add the acquisition cost to the cost of fixing up the property. This gives you the fixed-up cost. Then, subtract the fixed-up cost from the future value to get your profit or equity position. The formula reads:
Future Value – Fixed-up Cost – Acquisition Cost = Profit or Equity.
The answer to the second question creates quite a list of opportunities. You can create value by:
Cosmetically improving the property
Adding bedrooms and bathrooms
Adding a flag
Zone changes or variances
Adding apartments to existing units
Adding parking or storage for income
Tear-outs and new builds
Condo conversions
Improving the floor plan
Finishing space such as attics or basements
Subdivisions
Planned unit developments
Changing the property’s income
Special use permits
Platting & entitling property
All of the things mentioned above can help you take an existing property and make it more valuable. You can make some of the changes with no physical labor at all! I would love to teach you how to change properties for a profit. Learn how to fix up your life by fixing up properties!
Happy Investing,
Kendall E. Matthews, CRMC
Phoenix, Arizona Investment Real Estate