They buy ugly houses. Call a 1–800 number and they will take a house off a seller’s hands for a hefty discount. Then, contractors fix up the house, sell it for market rates and make a great profit.

Have you ever considered buying the ugly house, doing or managing the work yourself and ending up with good home equity?

Many of these houses only require cosmetic changes.

Can you paint? Can your local home improvement store install carpet and kitchen cabinets? Can you have a granite company complete the countertops?

Steps to Using Your Elbow Grease to Build Equity:

1. Look at the bones of the property, not the design features.

Most people want a house that is move in ready and will pay market rates for that benefit. If you are looking to build equity, you will have to look past the wild paint colors and stained carpet to see the possibilities. Look at the “bones” of the house. Is the building in good shape or will it require significant structural work?

2. Get an inspection.

A good inspector will provide you with a list of things that need to be corrected, but also recommend what specialized inspections should be completed. Complete the specialized inspections that are recommended if those areas would require a large capital outlay to correct problems.

3. Know your limits.

While knocking down walls and moving plumbing may be beyond your skills, hiring professionals to handle complex construction may not. Make sure you include the additional costs in your repair/replacement budget.

4. Take into consideration your situation.

If you work eighty hours a week, is it realistic for you to have the time to dedicate to remodeling a kitchen? You may have a general contractor who can oversee the work and get it done for you. Do you have small children who would be jeopardized by living in a construction zone? You may be able to rent a place or stay in your current home while construction is completed to ensure the safety and convenience of your family.

5. You make your money when you buy.

Don’t overpay for a home that requires extensive work. Your Realtor can assist you by providing information on what the house will be worth once the work is completed. You will need to determine the cost for repairs. Have your Realtor add a section into the contract that allow access to the property for your contractors to give you estimates for work that needs to be completed. You’ll want these estimates completed before the inspection deadline has passed.

6. Don’t overimprove your property.

It is easy to go overboard with granite, marble and very expensive fixtures. Be realistic. What features do nice houses in your area have that will help you sell your property in the future? Don’t put a $50,000 kitchen in a $100,000 house. You’ll never get the money back.

7. Work with reputable contractors and get your agreements in writing.

Many people have lost lots of money on shady contractors. Do your homework. It may be worth it to pay more to an established company with a great track record than to someone who won’t do the job right. Make sure to get it all in writing. If it is not documented, it didn’t happen. The Denver Better Business Bureau has tips for hiring the right contractors.

There are many houses available in this market that are getting passed over by buyers looking for a move-in ready house. One of those may be a house that will help you build your equity and your future with just a little elbow grease and a good imagination.  

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This entry was posted on Saturday, February 24th, 2007 at 7:52 am and is filed under Buyers and Sellers, Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.