You can significantly profit on reconstruction properties. A lot of old properties out there, sold for a cheap price, but you would need cash. Also, you’ll need cash to make all the needed repairs. You’ll also need to pay interest payments every month while waiting for subcontractors to end the work and for the new purchaser to qualify for his credit. Rather than buy the premise, you can lease it for 6 to 9 months with a possibility to buy. If you’re not into repairing properties, locate an undertenant with shiftman skills.
Let’s take an example. Pretend, there was a college professor, who had a property, which was vacant, because he was living outside of state. It had a completed basement, but had almost no upstairs. And the whole house needed to be repaired. The former owner took the loan on this property and, after paying it for over year, moved out of town. For instance, it needed a $10,000 repair. And you offer him to lease it for 2 years at $400 per month with a purchase possibility at $40,000. And then, instead of doing the entire repair, you place a paper ad:
$0 down, You Fix
It actually was a real event. And the first tenant that claimed to be experienced moved in and began paying $600 a month. After the lapse of six months, he didn’t perform any fix up, stopped paying rent and was evicted. And the same ad was advertised once again. And again, the tenant that moved in didn’t do anything. The landlord evicted him also. This entire situation teaches us a lesson.
NO ONE MOVES IN TILL THE WORK IS DONE!
In the end, the landlord found a guy that was in the dry wall business. He performed the entire fix up, which was perfect. He was paying $650 a month for half a year and applied his option to buy at $54,000.