Disgusting Is Good

ugly Houses Hey Moguls, Steve Cook here…

It always amazes me, when I talk to beginning investors, the types of homes that they are looking at and calling fixer uppers. They frequently tell me stories of homes that they feel need to be torn down… and when I see them, I think they are in good shape... at least as far as a rehab is concerned.

But then I think back to when I first started in this business. I think about the homes I had been looking at, and the difficulty I had in overcoming my first investor purchase. In my early days as an investor, I pursued homes that today I wouldn’t waste a minute of my time looking at.

I was one of those people who believed that this REI thing couldn’t work where I lived… and if I would have kept on that path I started on, another casualty would have been listed in the book of failed real estate newbies.

Lemme tell you what a real fixer upper looks like.

I used to think that homes that had dirty carpeting, needed some painting, and had a water stain on the ceiling were fixer uppers. Today, I consider those homes to be in move-in condition. In fact, people are probably living in those types of homes now.

The first home that I ever bought as an investor was one that my initial instinct said to bring in the bulldozer. I bought the home for $38k, and I totally fixed it up for $7k and sold it for $64,900. $7k can go a long way.

The home looked pretty good from the outside, thank goodness. If the outside would have looked like the inside, I probably would have walked away from my first deal before ever stepping inside. When I did get inside of the home I was totally bummed out. My heart sank, I felt nauseated and sick from the site and smell, and the heebie-jeebies that I felt brought on this overwhelming need to run away and take a shower.

The second we opened the door, the smell of cat urine just about knocked me over. I have asthma and this house kicked it in. The carpet was torn up from the floors, the walls were painted all different colors. I put my shirt over my mouth and nose and began to venture inside with caution.

deal I gingerly walked across the floor expecting it to cave in. As I got near the kitchen, the first thing that I noticed was the bright orange and green paint on the walls. I was disgusted by the remains of dead roaches, the cabinet doors missing, broke and hanging off. I couldn’t tell you what color the floor was supposed to be, and I never did find out.

By this time, I felt a little more comfortable that the floors weren’t going to cave in beneath me, so I ventured toward the stairs.

As I climbed the stairs, I decided to test them first by tapping my foot down a little before allowing my entire weight to be supported by the step itself. I walked up to the second floor and into one of the bedrooms. It was painted electric blue, had holes punched and kicked in, graffiti on all surfaces, the closet doors were on the floor and the bedroom door was hanging from one hinge.

I was no longer surprised by what I was seeing. I then walked across the hall to the bathroom.

The bathroom was no prize either. The floor in there was dangerous. Next to the tub it was really soft and rotted through. I had to be careful. This room was absolutely filthy – the sink was stopped up with something that appeared to have been gooey but dried out. (You’re welcome for that mental image.) The toilet was no better. I wouldn’t even pick up the toilet seat to see what was inside. The tub was rusted, had stick-on flowers and the tiles were falling off the wall.

I figured that a stick of dynamite and $10k would do the trick to bring this bathroom back to life.

Then we entered the other bedroom. This didn’t have any damaged walls, but there was writing on the walls and on the door. They tried to cover the writing up with a red and white paint mixture, they didn’t do a good job of mixing it so it looked really bad.

I only had one more place to check out, and it was the basement. I immediately began to feel like I was walking into a dungeon and was glad that there was a Realtor with me, otherwise I doubt that I would have gone down there by myself. When we got to the bottom and turned a light on, surprisingly, this was the best thing the home had to offer. It was by far the cleanest room. It just needed some cobwebs cleaned up. But there was a new furnace in the basement, so I finally saw a positive about this house.

Disgusting is good deal

kids I walked out of the home feeling like I wasted my time. I couldn’t believe that someone would even try to sell such a home. I almost felt as though it should be illegal. I wasn’t going to pursue the home until a friend of mine told me that he was going to buy it if I didn’t. So just to keep him from buying it, I did. I was scared, I couldn’t believe what I had just done.

I talked to one investor about the home who was willing to give me $40,000 for it. I was shocked.

I had a $2,000 profit before my eyes just from one conversation. But my friend made me keep this one to renovate. In the end, I put in a new kitchen, carpeting, paint, fixed the rotted floor in the bathroom, put down new vinyl tiles in the bathroom and kitchen, had the tub refinished, put a new vanity and light in the bathroom and completed the renovation for just under $7k.

The place looked and smelled new, and my initial impulse was to tear it down.

These days, I walk into houses that are much worse than that one, and I see opportunity in them. I’m mostly immune to yucky smells – believe it or not – I think I’m enjoying the smell because it means CHEAP!

When you see a home that totally disgusts you, that is a good thing, because it means that most other people are disgusted by it as well and just aren’t interested in it. That's the type of deal you want. Go get a disgusting house and make some money.

Happy Investing,

Steve Cook