Fixer-Upper Rentals — Recession-Proof Investing

A System That Works

Buying lower-priced fix-up houses, using your own time & effort to fix them up (and that of friends and relatives), and renting them is a fairly low-risk, high reward way to generate wealth & security. The four chief benefits of investing in fix-up houses are:

  1. When you buy a house in need of repair, you pay less for it than for a normal house. Since you paid less, you can take out a smaller loan and have lower monthly payments.
  2. By doing repairs yourself (as much as you are able to), you save money, and you learn valuable new repair skills.
  3. By renting, instead of flipping, you now own a house that is typically increasing in value (by an average 5{629041bc9a6ff041fc0b7c543548a1c0f13f59ea1b47b2bc21e5d68d30575962} per year) the same time that the rental payments, and your monthly cash flow, are going up.
  4. When you approach retirement, your loans will be paid off (or close to it) and the now-higher rents that you continue to receive are like an extra pension for your retirement.

Pitfalls to buying in fixer-upper houses, such as broken plumbing systems, worn out electrical wiring, and cracked foundations can be avoided with the help of a professional inspector. Once identified, these conditions can laid before the seller, who must either fix the problems to the satisfaction of the buyer, or the buyer can pull out of the deal.

Of course, it takes hard work to find a house, make all of the repairs, and learn how to deal with tenants. If it were easy, everyone would be doing it. You’ll learn not to take life, or tenant problems, too seriously. Shakespeare said, “A light heart lives long.”

The good news is that you learn valuable technical and people management skills that are useful in many other aspects of your life. You are also rewarded with a feeling of satisfaction in your accomplishments, a stronger sense of financial security, and the peace of mind that accompanies it.

Fixer-Uppers + Recession = Opportunity

The higher prices and more-difficult-to-obtain loans of today’s housing market present both challenges and opportunities. In general, recession may be a good thing for fixer-upper investors for two reasons:

  1. Many people are reluctant to buy houses, or make any big purchases until the economy picks up. This drives up demand for rental properties, and allows rental property owners can raise prices.
  2. Since demand is low and supply high for existing houses, prices are dropping. This combined with the large number of foreclosed properties coming on the market, makes it an opportune time for investors to accumulate more rental properties.

This could be an opportunity, and Thomas Edison said, “Opportunity is missed by most people because it is dressed I overalls and looks like work.”