For the buy & hold investor and or Fix & Flipper, there is the allure of taking a distressed property and making it bright, shiny and livable to generate a good cash flow income. There are many “distressed” properties tucked away in neighborhoods all over the country. Some are so distressed that the capital expenditure needed to renovate them outweighs the cash flow benefit and yet others are shiny diamonds under the surface just waiting for the right buyer to come in and polish them. How do you tell the difference? What do you look for in assessing these properties?
Having the Vision
To the every day buyer this house looks like a complete disaster. What the savvy real estate investor sees are these things:
Looking beyond the trash, the garish poor paint job and the flea infested carpet there are hidden gems. The walls are straight and plumb, showing no foundation settling or cracks. Paint can be covered up with fresh paint. The windows are relatively new and not broken so there is not a window replacement cost. The trash can easily be removed and discarded. Under the carpet happen to be lovely hardwood floors that just need a light refinish job so there is no cost to be incurred on flooring replacement. The other benefit is that the heating and cooling system up to date as well as current wiring, and electric box. These can all be big-ticket items that can run the budget up quickly. Many of the things in this house are simply cosmetic that can also make for a quick turn around in completion and getting it to market.
When looking at this kitchen there aren’t too many redeeming qualities at first glance. However, when looking closer we can see the positives. The layout of the kitchen in relationship to the rest of the house is good and the plumbing will not have to be moved or replaced. A new countertop and base cabinet with an L-shaped peninsula, new backsplash and new upper cabinet doors with new hardware along with new flooring and this kitchen won’t even look the same. This can all be accomplished without a complete tear out. Adding an upgraded fixture to the existing stainless sink and modern appliances also will make the kitchen seem like a real upgrade.
Renovation doesn’t have to “scare” you. With a vision, some attention to detail and knowing what to look for it can be a win win for you the investor AND the neighborhood will appreciate the appreciation!