As we approach the holiday season, I reflect back on why I enjoy the fixer-upper business.
My philosophy is to buy houses in need of repair, fix them up, and rent them out, in my spare time. I first began doing it because the economy was shaky and my full time job was looking shaky too. I wanted some security so that even if my job went down the tubes, I would still have enough income coming in to keep floating. And, I wanted some security in retirement since I haven’t socked away much in IRAs and I have little faith in the stock market. I wanted to control my own destiny, rather than letting some distant fund manager decide my financial future for me.
Buying fixer-upper houses allows me to get into a property at a low cost, paying as little money as possible. I try to buy bad houses in good neighborhoods. I make money through monthly rents, appreciation of the house values (5%/year on average), and through tax deductions and tax credits.
Becoming a landlord is the major obstacle most investors face in this business. Tenants can be cause migraines and make life difficult for us. There are two approaches to deal with this drawback. First, remind yourself that you can learn to deal with tenants only by doing it. The more you do it, the better you get., and the financial reward makes it worth it. Secondly, the 1997 Taxpayer Relief Act home tax credit allows you to sell a house you have live in for 3 of 5 years, and pay no federal income tax. In this approach, you never deal with tenants, but you also lose one of the greatest advantages or home ownership - long-term appreciation.
This profession is fun, most of the time. I enjoy repairing properties. I’ve always enjoyed fixing things that are broken, although I never got really good at it until I started buying houses. It gives me a great sense of inner satisfaction to return a broken house to its former glory. And, I have grown a lot as an individual by learning to deal with difficult tenants. It’s one of those cases where, we are forced to do the thing we most dread, but then we wind up learning immensely from the experience, like marriage (yes, my wife rarely reads these blog posts).
Most of the time the fixer-upper business is on auto-pilot. Tenants send their checks in and my major responsibility is to deposit them. After the initial repair work on a newly purchased fixer-upper, the major work comes when there are 1) minor repairs, things like leaky faucets, leaky roofs or washing machine malfunctions, and 2) when tenants move out and my wife and I need to get it ready for the next tenant. We now have it down so well that we can usually have a rental house put back together and the “For Rent” sign in the front yard in 1-3 days. My wife, two boys, and I march into the place like worker ants, each one understanding his/her designated role, and before we know it we’re done.
My tenants have been people that I would normally never have come into contact with. We live in different worlds. In many cases I have enjoyed getting to know them. For those I didn’t enjoy so much, I learned new people skills. Or, perhaps better said, I was forced to learn skills in people management , or I would have gone out of business. I admit that there were several times during the first few years that I was so frustrated that I thought about giving up this dream. But, fortunately, despite the frustration, I kept plowing ahead with fortitude and didn’t throw in the towel. And, of course, when I didn’t have the fortitude to carry on, I used the next best thing - three-and-a-half-titude!
To me, one of the best parts of life involves growing and learning, and my spare time fixer-upper business allows me to do both,. It doesn’t hurt that I make some money as well, and have some security for the future.
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