Buying a home that is in need of attention can be a highly lucrative investment. However, this depends on whether you take the necessary precautions and follow the right procedures.
Irrespective of the type of property that you are looking to invest in, it is imperative that you do the necessary research and lay down the groundwork before committing to the purchase. Doing your homework is particularly important when considering properties that would be considered ‘doer-uppers,’ because you will need to pay additional money onto the property to renovate it. Understanding what is a good buy and what should be steered clear of is a key aspect to success when purchasing a fixer-upper property.
There are several advantages to purchasing a home that needs renovation. For a property investor with the capital to spend on renovating, buying a fixer-upper is a way of securing a higher profit margin when they sell the property, provided of course that they are savvy with how much they spend fixing the property.
Another advantage is that there is often less competition in the market for these kinds of homes, which means that they generally sell for lower prices than most of the homes in the area. Again, this increases the potential return on investment – especially if the property is purchased at a good price. A property buyer’s return on investment will largely be based on the decisions they make at the beginning of the transaction. The ideal property might be concealed under the guise of some unsightly features that would normally turn potential buyers away. Buyers looking at doer-upper homes will need to see past the home’s cosmetic appearance and see the home’s true potential.
Here are a few tips when looking for the ideal fixer-upper home:
Location is key
Few aspects will have a greater impact on a property’s potential for appreciation in value than its location. A property’s location determines so much of its current value, as well as its potential growth in the future. From an investment perspective, homes that are in proximity to a range of amenities such as shopping facilities, train stations, business hubs, entertainment areas, and excellent schools generally see a higher percentage of capital growth over the long term than those that aren’t.
The home’s design
Renovating a home is one thing, but completely changing the design of the property can be very costly. It is important that the shell of the home is designed well and laid out correctly. Sometimes it is better for buyers to walk away than to try to correct a bad design.
Overall condition of the home
While certain renovations are manageable, if there are too many defects or possible structural damages, the home may not be worth the money or the effort. A good fixer-upper is a home that is at least in a livable condition. The cosmetic appearance of a home is fairly easy to change. However, major alterations to the home’s structure or foundation require a lot more money and expertise. A home with these kind of issues will be a money-trap rather than a good investment.
Gathering as much information as possible to make an informed decision will pay off in the long run. If you are unsure of anything seek the advice of a reputable contractor to ensure that the home is structurally sound. It better to go into an investment with both eyes open, than blindly hoping for the best.