Buying, fixing up, and selling houses is fun! I have been doing it, one way or another, for more than 30 years and believe me, it is profitable if done properly.

So this section will tell you a little about what I have learned after all these years.

By far the most important thing is buying right.
Realtors don’t get it. People just coming out of seminars don’t get it. The public doesn’t get it. Very few people get it.

Very few houses placed on the open market e.g. in the MLS or advertised in the newspaper or wherever, sell for much less than “market value.”

The MLS is the most “efficient” system to dispose of houses at their true market value we have. When a property is listed at a true discount the Realtor who has the listing will generally be inundated within days with offers including offers for more than the asking price. Every sub-market in this town has its local experts who look every day at the MLS and know exactly what is going on. When a property is under priced by the listing agent, they pounce on it on behalf of their clients or for themselves. The market works.

Currently, of course, we are inundated with so-called bank owned properties or properties in which the owner is still in the house and the selling agent has listed the house “subject to bank approval” e.g. a “short sale,” the property has a loan against it for more than it is worth.

Stories abound about how stupid or irrational and difficult it is to deal with lenders. Many Realtors won’t even show houses to their clients if it means waiting for some silly “loss mitigation officer” to make up his or her mind finally to approve the short sale. Many if not most agents don’t even bother with these listings because of the headache involved.

Bank owned properties are generally priced too high in order for you to make a decent profit. Before listing a property for sale, loss mitigation departments are generally required to obtain a professional appraisal and a broker price opinion. So what makes you think that these people, who presumably have their employers best interest at heart and who deal in this stuff day after day, will sell you their property cheap so you re-sell it and make a bundle?

You must become more knowledgeable than them.
That is it. You must become so comfortable in your chosen market that when you do see a deal in which the “experts,” meaning the agent and the lender, have made a mistake, you can pounce on it and “steal” the property.

Do they make mistakes often? But, of course. Are they under pressure to dump properties at certain times of the month? Probably, I don’t know. Are they under pressure at certain times to sell a certain number of houses? I would assume so. Did the previous three so-called buyers get rejected by the new lender and did this particular deal just get back on the market and did the lender decide that “this house has to go today”? Maybe.

Did the appraiser and the Realtor tell the lender that the house in question needs X amount of work and did you discover they are wrong and you can fix the problem much cheaper than they thought? Well?

So how do you learn all this and how do you learn about values and such?
Work, hard, old fashion work my friend. Such as deciding on a part of town you are comfortable with and then learning all about it. Seeing every house listed for sale in and out. Maybe 100 houses, I don’t know. Looking up and driving by every sale in your chosen price range and area. Finding out how these houses sold and how long it took. Finding out what concessions the sellers had to make and whether or not fraud was involved.

Learning what things cost. How much it costs to do a bathroom and a kitchen. Finding out how much a roof costs and how much to do a yard all over with pretty flowers and a new lawn and fence. Learning how long all that takes and finding out who will do all that for you or whether you are even capable and willing to tackle this yourself.

All right, so now I have done all that, what is next?
At this time, my friend, you get to make offers, many offers, a lot of offers, dozens of offers. So many offers that the Realtors you were working with have all left you in disgust because they can’t make any money off you because you are too tough. So many offers that the listing agents representing the lenders get to know you and remember you maybe just a little, and when they get your third offer on the same property within 30 days you may just get lucky.

Because you are now so confident of your values and you know what things cost, you can make offers without any conditions whatsoever and beat all those other fools who first must have their contractor look at the house before they can commit.

Because you are now so confident that you know what you are doing, you can give the seller a cashier’s check for say, $10,000.00 as non-refundable earnest money and promise to close anytime it suits the seller.

Because you are now the expert, you can make an all cash offer and not worry about if you will get the financing or not. You know you can get the dough.

Do you get the picture?
To be successful you must concentrate and specialize. Do you live in Aurora? Well, you’ve got a bonanza in your own back yard. Older parts and not so older parts of Aurora are prime targets. Be sure to stay in the cheaper areas. Those are the areas in which people have been hurt the most by the so-called sub-prime melt down.

Do you live up north? Great! Adams County is a veritable paradise for an ambitious person.

Jefferson County? Perhaps. Much tougher to buy here.

Central Denver? Some great areas especially if you are very handy but a potential trap for the not so gifted.

Southwest Denver? Great! The 80219 zip code is littered with foreclosures.

Northeast Denver? I have several very successful customers who will work only in Montebello and North Parkhill. Go figure. Other people avoid these places like the plague but these folks know their market and are doing very well thank you.

A Final Word about Buying Right
If you are just getting started you will no doubt be a little discouraged or daunted by the remarks above. Don’t worry. Rome wasn’t built in one day. Take your time. Learn. Stumble along. Your first deal may be a failure and you might only break even, but so what? You have to learn somehow.

Better to barrel ahead and learn on-the-job then to endlessly analyze and worry about the what ifs. You can always recover and do better next time.

During the last big downturn in the Eighties and early Nineties I personally bought and sold 137 houses and I can assure you that not every deal was a fabulous success even though I had already been in the business as a Realtor for more than 10 years.

But in the end, I could start this business of lending money to people like you with savings I accumulated doing fix and flip houses.