| By buying a fixer-upper rental, you can get | | | | fixer-upper for $75,000, and after $12,000 in |
| positive cash flow and a fast increase in equity. | | | | repairs and $3,000 in other costs it is ready to |
| The downside? This can be a fair amount of | | | | rent. Even if you refinance to get some of your |
| work, and you have to be a landlord. | | | | cash back out of it, you will be borrowing $25,000 |
| It is getting tough to have positive cash flow | | | | less than for similar homes in the area (you'll have |
| from rental homes, due to real estate prices | | | | a total of $90,000 into it versus $115,000 for |
| going up faster than rent in most areas. One way | | | | other homes). |
| to deal with this problem is to buy cheaper | | | | What does this mean? Your mortgage payment |
| homes, to keep the loan payments down. These | | | | will be about $160 less per month. That can mean |
| homes will usually need some fixing up. | | | | positive cash flow. You also have created $25,000 |
| What you want is houses in nice areas that are | | | | in equity if the home is now up to the standards |
| dirty and ugly. The more they scare off the usual | | | | of the other homes around it, and so worth |
| buyers, the more likely you are to get a great | | | | $115,000. That means that if being a landlord |
| price. However, you want to find homes that | | | | doesn't suit you, you can sell the house for a nice |
| mostly need "quick fixes," like cleaning and painting | | | | profit. |
| and new carpet. | | | | Another way to boost that cash flow is to now |
| Let's suppose you are in an area where | | | | lease the home and give the renter an option to |
| two-bedroom homes are selling for about | | | | buy. You will probably be able to get $150 more in |
| $115,000, and the rents leave most new landlords | | | | rent, which helps the cash flow, and you may be |
| breaking even or with slightly negative cash flow. | | | | able to sell at a higher price than market as well. |
| This is a tough place to make money on rental | | | | Bottom line? When cash flow seems impossible, |
| homes. | | | | start looking at those fixer upper rentals. |
| On the other hand, suppose you buy a | | | | |