It should go without saying that the overall cost of buying fixer-uppers has a direct effect on one's bottom profit line when it comes time to reselling. Of course, the main goal behind the entire process is to buy low and then resell high to make the most profit possible, which is why it's extremely important to never pay market value when buying fixer-uppers for the purpose of reselling them.

Understanding Property Values

Without being able to easily determine property values, no investor will be able to turn an attractive profit, not when purchasing fixer-uppers, nor when listing and reselling them. Learning how to make property comparisons by utilizing the many tools available in the real estate market today will indeed take a bit of time and plenty of research, however, the end result is more than worth the effort spent.

Researching the Market

Too many investors make the mistake of relying on the internet, word of mouth, or on simple photographs in listings when it comes to researching the market and finding fixer-uppers that would be worth their investment dollars. To determine whether or not a property is truly worth it, you must personally look at it yourself with your own eyes, which also applies to looking at potential contractor's current work that's done at varying levels and stages of renovations. While a picture may be worth a thousand words, in this case, seeing something for yourself just can't be beat.

Many real estate agents rely upon what's known as a CMA, or Comparative Market Analysis, when it comes time to determine the value of a property, which essentially, is a spreadsheet of information that outlines any recent sales within a certain geographical proximity to the property in question.

To create your very own CMA, use data only from sales that have already been completed for the truest results rather than those that are still pending or under negotiation, and turn to resources such as real estate appraisers, the local tax assessor and county clerk's offices, as well as the area's local real estate brokers.


Estimating All Costs

Estimating all costs of your fixer-upper projects includes first the acquisition costs, which are the property's purchase price, any taxes that haven't been paid, and the origination fees, as well as the amount to renovate the home, such as the cost of a new roof, new carpeting, paint, or plumbing and electrical repairs.

Also, never make the mistake of forgetting about any hidden costs, and you can rest assured that there are at least one or two you hadn't counted on at the beginning of your real estate ventures. The property will need to have the proper inspections, as well as ensuring that all necessary documents are in order, like the certificate of occupancy or building surveys.

Having an accurate and realistic picture of the total costs involved is really the only way to guarantee you'll be protecting your money and enjoying a healthy return on your investments when buying and reselling fixer-uppers for profit.