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There’s no getting around the fact that investing in a fixer-upper home is a gamble. They come with built-in problems that you, as a homeowner, have to correct. Sometimes, one problem just leads to another problem, then another. Even if you have a “project” home carefully inspected, you may still experience deep-seated issues that seem to come out of nowhere, leaving you in possession of what’s commonly called a money pit. On the other hand, you could reap tremendous financial benefits if you succeed in transforming a fixer-upper into an appealing property in a good location. You may even put yourself in a situation so profitable that it will transform your financial situation and set you on the road to a solid financial future.
Fixer-uppers aren’t subject to the same market ups and downs as typical homes, so determining profitability is almost solely up to you and your ability to rehabilitate a home that may need a lot of work, patience, and determination. Finding the right fixer upper for you requires the ability to see the potential in a house that others would pass by with little but a glance. You should also take advantage of a realtor who has expertise and experience in finding fixer-uppers in your area.
If finding one that’s right for you proves difficult, check out other desirable areas for disadvantaged properties. Remember, location is paramount in real estate, and fixer-uppers are no different. You need to focus on desirable areas, which is why the assistance of an experienced agent is important. Buying near a manufacturing plant or in a sketchy neighborhood won’t do you much good, even if you turn a heap of rubble into a showplace. There are several other factors to bear in mind as you look for that perfect rehab opportunity.
Take note of the surroundings when considering a property. If there are old spare tires and trash laying around or if neighboring houses are in a dilapidated state, it’s probably time to look elsewhere. Always bear in mind saleability and return on investment, which is what it’s all about if you’re fixing up a property with the intention of earning a profit.
Floor Plan and Configuration
It’s also important to remember that layout and configuration are important factors in whether it will be a viable property when it comes time to sell. Statistically, buyers typically favor a home with three bedrooms and more than one bath. Houses that do not possess a healthy sense of flow can be problematic, especially if it means knocking out walls and creating room the hard way.
How Handy are You?
Presumably, you possess some degree of skill with tools and building materials if your aim is to fix up a run-down house. There are varying skill and experience levels, and sometimes yours doesn’t match the need of a house that requires major structural work or has problems with the electrical system or plumbing. Generally speaking, if a house will require major renovations and the expertise of contractors, it’s probably either beyond your skill level or budget and may not provide you with the kind of long-term profit you had in mind.
Getting a Loan
The state of the property you’re considering has a lot of bearing on the type of loan you’re most likely to get. For example, a conventional mortgage cost less than many government programs that require mortgage insurance and they have a variety of down payment options. On the other hand, conventional loans may be difficult to obtain if the property in question needs major renovations. If it’s just cosmetic and appraises well, the mortgage company is more likely to agree to a conventional loan. If major renovations are in store, you may need to look at fixer upper loans like an FHA 203(k) mortgage or a Fannie Mae Homestyle Renovation mortgage. Both have their pros and cons too, so be sure to do your research before settling on one.
Where to Begin
Once the home is yours to mold, you can ease into rehab and relieve the strain on your budget by beginning with some do-it-yourself projects, such as patching walls, stripping wallpaper, refinishing hardwood flooring, replacing damaged baseboards, repairing broken windows, painting kitchen cabinets, or painting your house’s exterior. Just be sure you have the right tools for the work, such as power drills, sanders, jigsaws, and a stout collection of hand tools.
Finding the right fixer-upper requires vision and technical skills. It’s also important to find a property in a good area with the right layout that’s worth the sweat equity you’re going to expend. If you do it right, you can expect a substantial return on investment when you’re ready to move.