Stacie,

It looks like you've done your homework on what this house will need, but will the deal make money. I always say that I make my money when I buy. I can't spend it 'til it sells, but I make it when I buy. You should keep this in mind.

It's good to have a "general" idea of what you're going to spend on repairs for a house, but most ideas for fixup costs are just that, "general". It's hard for even the most experienced investor to put an exact dollar amount on a fixup and be accurate with it..To me the most important figure when looking at a deal is what can I buy it for.

I try to use a general figure for fixups and always try to figure a little high if possible...Then I make offers. What can happen if you don't do this is, you might have 20 hours of time involved in viewing and measuring a house, talking with contractors, and reviewing material prices...When you finally get ready to make your offer, the house is already under contract with another buyer...

Make offers first with a clause for a walk if you see you can't make the deal work... But the key is to tie the house up before you spend way too much time in studying the deal.

A walk clause can be anything you want it to be. Include a clause that this contract is null if buyer cannot acquire financing with a 6% loan for 30 years with no points and no money down or that buyer must have 60 days to have property inspected and contract is null if inspection is unsatisfactory to buyer....Anything to allow yourself to walk if you see it doesn't work for you...But the key is...Tie it up before hand...

Just look at it from the contactor's point of view...Would he really want to come out and spend a lot of his time with you looking over this property, giving you ideas of what to do, giving you prices of what it will cost, and you don't even know if tomorrow another investor might come along and buy it...

Keep in mind, that this is a common mistake we all have made. I have done this many times in the past myself, but I try not to let it happen now. After several houses you'll have a feel of what things cost and you'll have a price in mind... I would venture to say out of the 10-12 houses I have purchased so far this year, I probably saw the inside of maybe 3 before I bought them. I generally ride by the outside of a home and at that point, I have somewhat of an idea what the inside will look like...

But this goes back again to the price of the house....If I know in fixed up condition the house will be worth $75k...And I know I have to pay $15k for it....Does it really matter if it costs me $12k or $17k to renovate it??

So, I guess you see what I mean when I say that you make your money when you buy....If you can put it under contact soon for a lesser amount, then you're better off...Also, remember to start your offers low...You can always go up, but I've never had a counteroffer tell me my first offer was just too high, could I please lower it...

Jay Compton
Realty Investments, Inc.
Birmingham, AL