Handyman Specials: Diamonds in the Rough

If you are thinking about investing in a property that is a handyman special, here are some solid tips that will guarantee your investment will be as lucrative as possible.

How to Find a Diamond in the Rough
In the house flipping industry, a handyman special is generally considered to be a property in need of cosmetic work such as paint, a thorough clean up, yard work and maybe some minor repairs such as holes in a wall, bathroom fixtures or even changing out carpeting for tile.

A handyman special is not a property in need of a new roof, new plumbing, or one that has sustained serious flood or hurricane damage.

When looking for your handyman deal, here is your first word of advice. If a home is advertised as a handyman special, you can generally rule it out altogether. Your idea of ‘in need of repair’ and the seller’s idea are usually worlds apart. Try to think like the seller would. If you were putting a home on the market that needed a paint job and new carpeting, you would generally avoid those issues and capitalize on the selling points in your home description. Only when a home is seriously dilapidated does the owner use the term ‘handyman special.’ This is due to the fact that he realizes how bad of shape the home is in.

With that said, feel free to check out properties that are advertised as ‘handyman specials,’ but expect the worst because you’ll probably be right.

Assessing the Costs
When you’ve found your true diamond in the rough, do your walk through and carefully write down everything that will be needed to get the home into prime selling condition. This seems like an easy process and it should be, but it is worth mentioning that ‘prime selling condition’ may be different to every person.

When planning the cleanup of your investment property, keep cosmetic improvements neutral and classic. Don’t paint walls odd colors or add fixtures that reflect highly individualized taste. Neutral tones and fixtures that stay within the look and feel of the home are important. Realize that you are creating the look of a ‘model’ home. Leave the redecorating ideas up to the new home owner.

Calculate your total cost on based on real prices. Don’t guess. You may be hundreds or thousands of dollars off base. If you are replacing the carpet in a bedroom, take the time to measure and call for estimates.
Can You Sell at a Profit?

A handyman special is only a good deal if you can purchase the home at a substantial enough savings to allow you to turn a handsome profit after all the repair costs are factored in.

To calculate your potential profit, consider the following factors:
• Initial Investment – This includes the purchase price, interest, cost of renovations and improvements, money paid out to contractors and the amount of time you’ll need to invest.
• Potential Sale Price– Are your repairs going to make a substantial difference to the value of the home? What are other homes in the same neighborhood selling for? Consider factors that you won’t be changing and how they may affect the selling price. Are the bedrooms unusually small? Are the ceilings low or does the home sit next to another home in disrepair? Realistically looking at issues that may still exist after the work is done is the only way to make a true assessment.
• Turn-Around Time – An important factor is the amount of time it will take to make the repairs and put the property back on the market. The faster you can get this property in front of potential investors, the less money you will lose making extra house payments.

One final piece of advice for the handyman special is to be a good investigator. Don’t assume that every property in disrepair is due to the laziness of the owner. If you see that the yard needs plenty of work but you also notice that patchy brown grass seems to be a trend on the block, don’t be afraid to talk to the neighbors. Maybe you will find that the street has such poor drainage that the entire block floods every time it rains. These tidbits of information can be priceless before making final purchase decisions.

In order to become a skilled investor who knows how to work with handyman specials, you’ll have to learn not to gamble with your profits. If you have a thorough understanding of the market and all costs involved in improvements, you’ll be able to take a money-making, no-nonsense approach to the handyman special.