We buy the worst house on a good street in a sought after neighborhood. Sometimes we flip them for a healthy profit…sometimes we rent them out.
We DOUBLED OUR MONEY with Flip #1
Unfortunately we didn’t take alot of before & after pictures with our first house. This was before I started blogging.
If you have ever watched the Property Brothers, Drew & Jonathan Scott, you will see them taking first time home buyers to their “dream home” with all the bells & whistles only to send their dream crashing into pieces when Drew ultimately reveals the price of their dream home which is ridiculously over their budget. The two twins then do their sells pitch as to why the young couple need to buy a fixer upper in order to be able to afford the house they want.
Apartment Therapy recently wrote about how difficult it can be for young singles or couples to enter the real estate market and how much money they need to make to buy a modest home in various U.S. cities. Here’s the Salary to Buy a Modest Home in New York City, San Francisco & 25 Other Places (Posted originally on Apartment Therapy.)
How could we get into the market?
Many states and provinces offer incentives for first time buyers to get into the market.
When we bought our first house many years ago, the government was allowing first time buyers to use their Retirement Savings Plan as their down payment. Each person could use up to $20,000 of their plan. For a couple that meant $40,000 deposit for a home.
I remember being at the bank by myself with the banker and I wanted to maximize our RRSPs so I told the banker that we would buy them through a payment plan over a few months. He looked surprised at me and said does your husband agree? Of course he agrees I said. I told him after what I did – lol. It was actually one of the best decisions I have ever made.
Location, Location, Location
Now that we had our down payment ready, where were we going to buy? We certainly couldn’t afford a home with all the bells and whistles that was for sure. We couldn’t even afford a home with some bells and whistles. We had to buy a home with NO bells and whistles. In fact, we HAD to buy a “fixer upper” or we would not get into the real estate market.
Buying in the hot areas is the best use of your dollars because you know your home will increase in value for when you’re ready to sell.
We couldn’t afford trendy downtown so we bought in the country’s fastest growing suburb. When we were ready to sell, our investment had increased beyond our expectations.
We started looking a the war-time bungalows. In a suburb north of Toronto, builders build small bungalows on HUGE lots to meet the demand of the couples coming home to start their baby boomer families. We looked around at many bungalows and realized that our down payment wasn’t going to get us very much. There was one house that had 50 agents through it but noone had put an offer in. It had been on the market for many weeks. So of course, that’s the house we targeted.
The house had many challenges. The hardwood floors had been badly damaged by the homeowner who had been widowed for many years. She couldn’t afford the upkeep on the house and later was confined to a wheelchair. People went to the stairs to the basement but couldn’t go down because of the rotting smell of all the old rotten wood panelling that had been damaged by a leaky basement. PERFECT! After a month of negotiating, and despite the fact that the agent had kept holding open houses, noone would put in an offer so the owner had no choice but to accept our super low offer. Not many people are willing to buy a basement with mold and mildew – but we were game! Game on!
Most people can’t afford their “forever” home right away so they start with a “starter” home. Even buying a starter home in a hot or up and coming area will increase in value more than less desirable neighborhoods.
Once we closed on the house, we couldn’t move in for two weeks because of the smell in the basement. My husband demolished the basement and tore up & removed all the old wood paneling and rotten hard wood floors in the basement. It was such a shame that the hardwood was so damaged because the floors were once a beautiful wide oak plank hardwood. We repaired the leaks from coming into the basement and had the hardwood flooring upstairs refinished. We were able to move into our first home!