Step 1 – Look for “for sale by owner” signs in your target neighborhood, particularly in the yards of houses that show exterior cosmetic flaws such as peeling paint or unkempt landscaping. Owners who decide to sell their homes themselves may need to sell quickly, or simply may not want to pay realtor commissions. These sellers may be more willing to negotiate than traditional sellers, which might allow you to buy for a price below market value.
Step 2 – Place advertisements for buyers in local newspapers, free weekly and real estate newspapers, and on online classified ad sites. In your ads, include content that attracts sellers who might be unable to keep up with routine maintenance using questions like "Do you need to sell, but can’t find the time to make your house show-ready?" may help attract the sellers you are looking for. Include your contact information so motivated sellers can get in touch with you.
Step 3 – Ask a prospective seller to allow you to tour the home. Look for items that will need repair, such as siding, drywall, flooring, roof coverings and flooring. Ask the seller about the age of the furnace, heat pump, electrical wiring system and plumbing; if you plan to rehabilitate an older home, you may need to update these features, which can substantially decrease your profits. If you are not comfortable with inspecting these items youself, hire a professional inspector.
Step 4 – Research sales of comparable homes in the same neighborhood to estimate your selling price after you purchase and rehabilitate the home. Use your home inspector’s report or your own inspection notes to estimate the cost of repairs and subtract this amount from your estimated selling price. Subtract your desired profit to determine your target buying price.
Step 5 – Negotiate a purchase price with the seller. Offering a price below your target buying price and negotiating upward can help the seller feel like he is getting a fair price while allowing you enough financial room to make a profit. Include costs for cosmetic repairs and moderate updates you will need to perform before selling the home in your calculation of the purchase price you offer.
Step 6 – Purchase the home and begin by making necessary updates to make the home attractive to buyers. If the kitchen has outdated countertops or cabinets, consider replacing the countertops and refinishing the cabinets to give the kitchen a modern look. Likewise, refinishing bathroom cabinets and replacing dated faucets, toilets and mirrors can entice buyers to make an offer on the home.
Step 7 – Make cosmetic repairs and updates to give the home a fresh look. Repair any holes or scratches in the walls and give them a fresh coat of neutral-colored paint. Replace worn carpets with new carpet, or with bamboo or laminate flooring, and refinish stained or scratched hardwood floors to give the home a bright, updated feel. Update features such as ceiling lights and fans, curtains and appliances that may reflect dated decor.
Step 8 – Have a professional contractor address any major issues with the home’s electrical wiring and outlets, plumbing, heating and cooling systems. These updates may be necessary to meet local codes and pass a potential buyer’s home inspection.
Step 9 – Enhance the curb appeal of the home by making sure the exterior is clean and in good repair. You may also install landscaping features such as flower beds, solar fountains or lighting to make the exterior of the home more attractive to buyers.
Step 10 – Place the home on the market for a price above your target selling price. In your advertising materials and conversations with potential buyers, emphasize the updates you have made to the home. Include pictures showing updates such as new countertops, fixtures and appliances in your marketing materials. If you have rehabilitated an older home, providing information about the historical significance of the home may attract buyers willing to pay a price at or above your target purchase price.
Step 11 – Negotiate with potential buyers until you reach an amount near your target price. If you don’t mind advertising the home and meeting with potential buyers, you can sell the home yourself to avoid paying realtor commissions, which can help increase your profit margin.