Trying To Fix A Mess…Creating A Bigger One

Just from the title, you should understand the point I’m trying to make when it comes to homes and real estate in general. In the latest article we discussed bringing up the value of a house by doing some work to it and then just flipping it for something else. In this article, I will talk about the dilemma we put ourselves in, when it comes to homes and residencies in general. That is deciding to either try and re-construct a messy home with a lot of damage done to it (like mold, water damage, holes in the wall etc) or destroying it and building it from scratch.

Basically let’s be honest with ourselves. The only dilemma is the the financial one: you aren’t sure if just renovating the place will be a good/wise decision versus demolishing it and building it up from scratch. Basically your main fear is that the new concrete and asbestos won’t stick to the building in the long run. Well turns out that according to the partner of a residential demolition company, demolishing something (like a residency) and building it up from scratch can turn out to be cheaper in the long run. The argument according to people like him, is that the kind of repairs you will need to do a renovated building within the next 10 years, will more than cover the expenses of demolition. Also, according to this “expert” demolition costs have gone down significantly compared to twenty years ago and it is actually more affordable nowadays.

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Flipping Homes VS Buying Foreclosed Homes

Wow…this one is very spicy and in fact, it was suggested by someone that reached out to me by e-mail. You know what that means? That your topic of discussion can also be mentioned here, assuming that you let me know.

This actually a very interesting subject: we pretty much (almost all of us) know someone who does this for a living, or did it for a while to make some cash and to move on to other real estate projects. Flipping homes, is actually very good for someone that can do it in a timely manner and has the “know how” to get things done around the home. So you basically need to know how to build it up. It makes sense for people that know how to work a hammer and control a small group of other workers, building the home back up, and thus raising the value of the property. Whenever someone flips homes however, it is like playing the music chairs. You better be sitting on a chair when the music stops.

What I mean by that, is that real estate of course works in cycles. You got the good and the bad times. So whenever you decide to flip a home, you better be able to get it done fast, to get it back on the market and get rid of it. You don’t want to buy an older home, and decide to sell it a few months down the road (a lot can change.) If you could buy and re-sell the house in 1 months, that would be ideal (I know in most cases it’s not possible) but that is the only true way you can be more secure. Whether this is profitable or not though, a factor you need to bare in mind is what your time is worth. In other words, if you are spending most of your time preparing these homes, when you could be working on larger real estate deals, then you may be leaving a lot of money on the table. So you need to make sure that what you are doing makes financial sense.

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Partnerships In Real Estate? Good Or Bad?

In the latest article I did I said about people going into partnership situations when in real estate, especially when talking about different locations (so say a friend of yours is in the area you want to invest in.) There are of course other reasons you may want to partner:

  • don’t have enough funds for the 25% down payment
  • want to utilize the expertise of someone else
  • are scared to in on a deal by yourself (which ties into #2)
  • don’t have enough time to do all the work on your own

All these reasons are good reasons for you to want to partner. But remember that for every reason you want to partner, there are probably 3-4 reasons why you wouldn’t want to partner. For example, if you don’t have enough funds, are you sure you want to get into real estate? Money and financial success if often an indicator of how business oriented are you. So if you lack the funds (say you don’t even have $100,000 to invest) then you need to bee up your business skills. Because whether you like it or not, real estate is 70% business (some people will argue and say it’s 100% business but I want to be more conservative.) So make sure real estate is something you need to be doing right now (versus getting a real estate education.)

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