With increased buyer demand, even homes needing a little TLC are going on the market and and regardless of how much fix up these homes require, they often sell quickly.
Buying a fixer-upper home can be profitable, or it can be a nightmare. The secrets lie in choosing the right fixer-upper home for your needs and getting the property thoroughly checked out by a host of specialized inspectors.
Consider asking yourself these five questions before investing in a fixer-upper property.
1. How bad is it?
The severity of the problem can vary. Some properties may need just a few thousand dollars worth of paint job, while others may require a total overhaul. As one might quickly conclude, the less work a property needs, the less risk you’ll have to incur if something were to go wrong during the rehab.
Try to find properties that appear to need a lot of work to the general public, but may require only minor fixes. For example, homes sometimes have a bad smell because of pets, type of food cooked, or cigarettes can be viable because those smells are often easy to rectify. An ugly exterior paint job or a bad roof can scare away any potential homeowners but again, not very difficult to fix. So, before buying a fixer-upper, determine what the issues are and get a detailed estimate of the cost of repairs.
2. Is it worth it?
Another key factor to keep in mind is that a fixer-upper is not automatically a great deal. Do you have the resources and labor to get the work done? Can you get the home at a price that makes sense, and allows for the profit margin you’re looking for? Also, consider the time value of the time it will require, and what your carrying costs look like Could the investment in time spent fixing up the house be spent doing something else more profitable? . That leads to the next question.
3. Do I have the time?
No matter who is doing the work, a fixer-upper will take time. You may have to be present at the property frequently to make sure work is going as per plan and budget otherwise the cost of the project can balloon beyond your original plan. If you are planning to rent a multi-family you purchased but don’t get the place fixed in time to get tenants moving in, you can lose rental income that far exceeds the profit you may make from an excellent fixer-upper deal.
4. Do I have the skills?
First, ask the question if you will be living in the property while you fix it or renting it out. Since many people who are looking to get started with a fixer-upper rental properties plan to do the work themselves, often live at the property while fixing it. Do you have the skillset required, or does it need to be outsourced? Do you have the contacts? If you don’t already have a bank of specialists to call upon, it can be difficult to get contractors in place.
5. Do I have the drive?
Ask yourself what skills and motivation do I have to take on a project of this size, and I have the drive to complete the project. Are you going to seek help from friends and family or are you going to hire professionals who will do all the work? Whatever your answers are, getting a clear picture of your key driver will provide you clarity to make the decision. Also, keep in mind that the first fixer-upper is always the most challenging.
So think about these five questions when you are considering a fixer-upper. Investment properties can be a wonderful investment strategy, as long as you weigh the pros and cons carefully. It is crucial that you do your due diligence on any fixer-upper. Develop a detailed plan and account for potential pitfalls. Then take action, and get cranking.
If you are looking to buy a property, let’s talk – give us a call or email us anytime!