Let me ask you a question: If I show you a house that is in need of a major repair and renovation, would you buy it?

If your answer is: “It depends on the neighborhood and the place”, then that’s a smart answer. In all probability, you might have the makings of Donald Trump and Robert Kiyosaki waiting to be unleashed---or you might probably be one already.

Houses that are in need of major renovation or repair are what I call Fixer upper houses. Yes, some of them are admittedly in bad shape, but hey--if Britney Spears was able to resurrect from the dead, then everything’s possible, right? If you don’t believe me, then ask other investors. They’ll probably tell you they made quite a lot of money investing in these kinds of properties.

And now I can see those eyebrows going up.

At the risk of developing wrinkles on your forehead, let me give you the top five reasons why buying fixer properties can be a good move as an investor---and a deterrent to constant trips to your plastic surgeon:

1. The price is low.

As I’ve said earlier, some of these houses are in dire need of repair, so the seller is willing to sell it at a much lower price than its market value. It’s a much better deal if you could find one inside a good neighborhood where the prices of houses sell for much, much more.

2. You can qualify for a renovation loan.

And since you’ve paid a much lower price for the house, chances are you’ll take out only a smaller loan as well. One example of a loan is the FHA 203K. Many loans require you to live in the property, so make sure to ask a reputable lender about them.

3. You get to learn the ins and outs of real estate investment.

Now you can assess if a house has better value all because you’ve had the experience of building one. You improve your ability to spot a potential real estate investment just by looking at the surroundings, and you learn to justify the price of your house by saying you’ve included an additional bathroom on the third floor.

4. You learn the art of saving.

This is especially true for first-time investors, because many of them have a much limited capital for investment. Therefore, they learn to do things by themselves, such as paint the walls or install fixtures, to save on the expenses. Many have even discovered they have a talent for interior decorating as well.

5. You earn a lot of profit.

This is assuming you’ve learned what you need to know about fixer uppers and real estate investment. How do you calculate it? According to Jeffrey Rothefeder, you should add up the cost to your renovation and then subtract it from the home’s assumed market value after the renovation. Then subtract at least another five to ten percent for extras you decide to include, such as inflation, unforeseen problems, and other extras.

So, is investing in fixer properties all worth it? Yes, it is. Not only do you get to have passive income coming to you every month, you also develop better management, accounting, designing, construction, and handyman skills in the process. Sure, you might have to work harder than you’ve ever been—but the rewards will certainly be worth it in the end.
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