As appreciation begins to slow and interest rates rise, making money from a fixer-upper becomes less of a guaranteed win. A key to success is doing homework about what’s a good contender to be transformed and how to avoid the biggest mistakes. Josh Miller gave up a corporate job to found GoForClose in 2019, an all-inclusive marketing agency for real estate investors and wholesalers. He cites three mistakes your investor clients should avoid:
- Choosing the wrong right location. A property is worth as much as its location, Miller says. Look for desirable amenities like shopping, entertainment outlets, and recreation—and watch out for what Miller calls “irritants,” such as busy streets and other sources of noise. “To put it simply,” Miller says, “your best deals are those properties that are neglected and need a little TLC but are in a great neighborhood.”
- Choosing a contractor based on price rather than quality and speed. Investors sometimes try to save a buck, says Miller, so they hire a contractor who promises to make repairs and improvements for an affordable price or at a discount. “As the saying goes: You get what you pay for, and cheap labor yields cheap results,” he says. Find someone who offers both quality and speed—so work gets done fast and is worth the expense.
- Not crunching the numbers. Miller’s adage is that you make money when you buy, not when you sell. “Before you purchase any property,” he says, “crunch the numbers to determine if it will give you a good return on investment. Add the purchase price to the fix-and-flip expenses, include closing and carrying costs and contractor and real estate commissions, if applicable. Calculate the maximum allowable offer, and if the numbers make sense, make an offer.