Six Tips For Buying a Fixer-Upper

Several years ago, when the housing market was mired in the worst  recession since the Great Depression, buyers shied away from houses that needed  work. The buyers who weren’t put off from buying completely were interested only  in turnkey homes that were in move-in condition.

It was too risky for most buyers to buy a house that needed work. But, now that the housing market appears to be recovering, buying a home to fix up  seems more reasonable, but is not without risk.

There are basically two types of “fixer” buyers. One is the  flipper who buys a home, spruces it up quickly and sells it at a profit. The  goal is not to hold the property as an investment, but to find a buyer as soon  as possible after the redo is complete.

Flippers should avoid buying homes that have major problems to remedy,  which will eat into profits. A way to maximize profit and minimize carrying  costs during the rehab period is to buy at a low price with all cash. Buy in  areas where employment and transportation are good so that you will have a pool  of buyers for your product when it’s ready to sell.

Select the neighborhood carefully. Is it conveniently located? Are homes  selling quickly? What is the average “days on market” from list date  to sale date? This information is critical to knowing how fast you can turn the  property over to a new buyer.

For the last couple of years, institutional investors bought hundreds of  devalued properties at a time, many of them foreclosures. First-time buyers who  needed to qualify for a mortgage in order to buy were muscled out. A sole-practitioner  flipper should look for buying opportunities in smaller neighborhoods in good  locations, near jobs and transportation.

The other type of fixer buyers are those who buy for their own use. They  do not intend to flip the property, but want to increase the value of the  property over time while providing a roof over their heads. This type of buyer  may be able to pay more for a property than the flipper, but the price paid and  the amount spent on improvements should always be well researched before making  a purchase.

HOUSE HUNTING TIP: Don’t pay a Cadillac price for a home that needs a  lot of work if you want to make a profit on a fixer-upper. Find out the sale  price of recently sold homes in the neighborhood that were similar to the one  you’re considering, but in much better condition. Be sure to overestimate how  much the renovations will cost. There will always be unanticipated costs, so  there’s no point in skimping on your estimate to make the numbers work.

Keep a close eye on the costs of your renovations while you’re working  on the project. There’s always the temptation to improve more than you had  intended once you see how good the improvements you have made look. Even though  you’re improving the house for yourself, remember that you will be selling  someday and you want to make a profit on the time and money you invested.

It’s a great time to buy at prices that were not possible at the peak of  the market. Just make sure you know values for the neighborhood and don’t  overpay for a property that needs work. Fixer buyers who paid high prices at  the peak of the last market cycle not only didn’t make a profit, but some lost  the homes in foreclosure.

The housing market picked up in 2012 and will hopefully continue to move  in a positive direction. However, the home sale market is continually changing  and varies from one location to the next.

THE CLOSING: A well-informed, level-headed approach is the best bet. By Dian Hunter, Inman News

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Categories: INVESTMENT PROPERTIES, LATEST NEWS

Author:Marino Real Estate

Specializing in residential and commercial real estate sales for the better part of a decade, my approach to real estate involves establishing a trust with my clients, that contributes to the ultimate success of our transaction. Whether it is a personal residence, or an investment property, I am committed to negotiating the best deal for my clients, and have enjoyed a history of meeting the important and unique needs of the many clients which have entrusted me with thier real estate goals.

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