Almost all beginning real estate investors at some point in their investment careers envision "fixer uppers" as the way to quick wealth. This consideration is supplemented by the many TV programs sponsored by "get rich quick" brokers who never were able to make a living , let alone get wealthy, in real estate in general. Professionals in real estate investment refer to this approach as "sweat" equity buildup.

It is near impossible to compete with existing labor sources in Southern California in the areas of property improvement. The major problem with "fixer uppers" as we know them is that there is available a large pool of cheap labor in Southern California made up, mainly, of illegal immigrants. Much of this labor source is well skilled in the disciplines of property improvement and maintenance. They just work cheaply!

In my opinion, a better approach is what I call "smart equity". Whereas sweat equity results from the use of your brawn or muscle, smart equity results from the use of your brain. There is nobody, with any smarts, who will doubt that there is far more muscle than brain in the human race.

As a result of the above conditions, you face far more competition in the sweat equity approach than in the smart equity approach.

We all know what sweat equity entails. Get a hammer, some nails, a paint brush, some paint, etc. and go to work "fixing up the place". Experience has shown that you would be far better off seeking employment as a handy man than becoming a fixer upper in your own behalf.

Smart equity entails collecting what ever management skills, income property knowledge, investing savvy, people skills, etc. that you possess or can employ and analyze the property for ways to get a better financial return without having to lift a hand.

The classic example of a sweat equity fixer upper is the building that has been run down physically from lack of care, or money to provide that care and maintenance.

The classic example of a smart equity fixer upper is the building that has been poorly managed with respect to income and expenses. Owners who are afraid to raise the rents to competitive levels. Owners who paid no attention to expense control.

In short, the difference between sweat equity buildup and smart equity buildup is the difference between solving physical maintenance problems and solving financial problems!

Competent Investment Real Estate Brokers should be able to assist you in locating smart equity fixer uppers, developing a plan to capitalize on the condition and marketing or exchanging the financially improved properties.