Properties that are in poor condition are typically known as ‘fixer-uppers’. Many people buy these properties because they are cheap. These properties are also easy to ‘flip’ – this involves making improvements in order to increase the value so that you can sell the property for a profit.
For some people, these homes can be a great investment. However, for others they can end up costing more than they are worth. For this reason, you should be careful when taking on a fixer-upper. Below are a few tips on how to tell if a fixer-upper is a potential good investment or a money pit.
Assess the damage
A home inspection is always worth investing in before you buy. This will help you to understand the extent of the damage so that you know exactly what needs repairing. While some damage will be obvious, other forms of damage may be hidden such as foundation issues or faulty wiring. A full inspection will be able to reveal this hidden damage.
Work out the costs
Once you have a good idea of the condition of a home, work out how much it will cost to make the necessary improvements and repairs. Some repairs could be very cheap such as buying new doors or repainting walls. Others could be very expensive such as replacing a worn roof or repairing faulty foundations.
Know your budget
It’s important that you have enough money set aside upfront to carry out all the most necessary and urgent repairs. You may be able to put off or ignore some repairs altogether, but others may need to be tackled straight away. You’ll need to either have access to cash or the ability to borrow extra money to cover these costs. If the costs look like they’re going to be too high to afford, walk away.
Consider your timescale
If you’re looking to move into the property or move in tenants by a certain date, you’ll need to make sure that all the necessary repairs are done by this date. Similarly, when flipping a home, you’ll need to be able to carry out all the work quickly so that you can make a quick sale. Make sure that you can access the necessary money to carry out this work within this timeframe. It’s typically easier to afford repairs and improvements if you’re able to carry them out slowly over several months or years.
Hire the right people
It’s worth hiring specialists to take on certain repair jobs. For instance, when it comes to repairing drywall issues, use a specialist company like The Patch Boys. Always shop around for quotes so that you’re not getting ripped off.
Be sensible with DIY
Don’t bite off more than you can chew when it comes to DIY improvements. While going DIY will save you a lot of money of repairs, you need to know your limits. A botched repair could end up costing more money to put right and will affect your profits. Similarly, you don’t want to be buying any expensive equipment that you may only use once.
Understand your motivations
Not everyone buys a fixer-upper to make a profit. Some people simply enjoy the act of restoring a home, even if it costs a lot of money. Similarly, if you’re thinking of buying a fixer-upper and turning it into a forever home, making a profit may not matter. It all comes down to your motivations as to whether a fixer-upper is worthwhile buying.