Start-up in anything usually takes a hard investment. It is money to be spent according to planning with the intent of getting a return on not only the funds, but on time spent too. Its similar to the principal of "if you want to do business, you must be in business". This "outgo" ($$) at first looks like you are going in the wrong direction but that is how making money often begins
PRIME THE PUMP
To sometimes get something started, you have to prod it so that it starts its cycle to produce. Investors and entrepreneurs have learned this principal and practice scrutinizing where to invest instead of should I invest. Money planted into anything needs to come back and then hopefully reproduce itself
I recently had a listing where nothing was done to it for 30 years. It was owned by the original owner who made the necessary repairs from time to time and that's all. When he died, it became a rental & the heirs continued with the same approach. They rented it out at less money & did nothing for seven years
RAISE THE RENTS!
I was contacted to manage this property during this stage. I was told to raise rents shortly after I took it over and the potential to do so was definitely there. The home was way way below market. In the process of raising rents, the tenant, who was there for seven years spoke up when he got the increase
Yes, we were paying low rents. Yes, an increase is due after all these years and the tenant remained cooperative. But then he said this. Are you going to make repairs? Indeed significant work had to be done especially since we were wanting to bring it in line with the market. That meant spending money
PROTECT THE INVESTMENT
The owner was not eager to do so. He felt the rent was low enough, the people had been there for years, & became close-minded. Upon closer examination, I saw where if money was spent, we could recapture it no problem plus improve the badly needed property. Took some doing/arguing, but finally got some minor things done which supported the rent increase
About one year later, the owner decides to sell. The tenants were asked to move and I go to inspect the property for sale. It was run down, used up and mostly from wear & tear. No abuse noted but lots of neglect. Now comes an interesting point for this posting one of which many sellers will face
WHAT IS TOP DOLLAR?
Do we clean it up, price it based on current condition and then try to sell and see what happens? It will sell, but not for top dollar because of the needed & way past due repairs and upgrades. A fixer upper attracts a certain mindset buyer that doesn't want to spend money acquiring but instead fixing up.
DOLL (dollar) IT UP
That means all offers would be low ball and or require repairs while the property sits for days. Then, there is the other approach. Spend money here, doll up the place & then, we go out to market asking for top dollar, having a pristine product, where people are afraid to lose it if they don't act quick enough
70 % versus 100%
Getting the owner to spend money wasn't easy but instead like a tug of war for everything that came up. I wanted things done 100% and the owner was of a 70% mindset. That's good enough was his position every time something came up. I wanted it done completely and he wanted it done just enough
LETS SEE WHAT HAPPENS
Now I know what will happen when we go out to market. First, the seller will want top high dollar. That is expected. But I saw where we wont get it unless we set that up. Eventually, we met in the middle plus area and went to market. It is interesting to note the following:
30% COMES BACK TO HAUNT
What we didn't do, what could have been done and would have not garnered any notice but instead brought us the top dollar prize caught all the attention and was the basis for people hesitating, critiquing and making them want to spend less not more to acquire the property. The "less done" stood out. That less was the 30% we didn't do
100% BEGETS 100%
We ended up getting things fixed and upgraded that should have been done originally and the story ends on a happy note. How? The asking/purchasing value is there. Plus, all the money spent to fix it up so that we could get top dollar in just a few days into the market place came back and then some
SEEING IS BELIEVING
No one can successfully argue against: New appliances, fresh paint inside and out, new carpet and tile flooring throughout, and just about anything that stood out was attended to. When compared to every other home in the market at the time, it stood out for being a buyers first choice. DOM Four days!
Not every penny spent returns its penny plus. However, kitchens and bathrooms when remodeled do pay for themselves and return a profit as well. Fresh paint helps to close a deal as does new carpet, window coverings and flooring. Worse case is you break even. Best case? Top dollar & less time
YOU BE THE BUYER
What always works is the role reversal. I tell sellers to picture them buying this home. What would you like done? What would you object to when first visiting? Would you pay top dollar or see something to cause you to go the other way? When we put on the buyers shoes, we walk that walk
SPEND MONEY TO MAKE MONEY