Purchasing a “Fixer-Upper”
Buying a fixer-upper isn’t always a great investment. For example, consider the 1986 movie, “The Money Pit,” where Shelley Long and Tom Hanks purchase a dilapidated home that offers nothing but financial horrors.
If the right fixer-upper is chosen, these homes offer significant returns for investors. However, if it ends up being the wrong property, investors can face serious financial woes. Purchasing fixer-upper homes is not for the faint of heart. In fact, it takes a professional who is dedicated and has real-world construction knowledge and experience.
When evaluating if a fixer-upper is a good investment, investors should be completely honest and forthcoming with themselves. A carefully selected fixer-upper can offer a rewarding investment, but a money-pit fixer-upper only succeeds in racking up costly, profit restricting bills.
Many investors see the glamorous world of flipping houses on television and think they can handle this task themselves. However, if someone doesn’t have contractor experience, this can prove to be a costly mistake. Without an arsenal of tools, an investor will have nothing but up-front investments in equipment. Additionally, if renting tools, this cuts into profits.
When purchasing a fixer-upper, always consider obtaining a home appraisal and have a professional conduct a thorough home inspection. Updating the aesthetics of a property is far less expensive than tackling structural issues. For example, consider the following when looking at a fixer-upper:
- Is the roof in satisfactory condition?
- Is the foundation in good shape?
- Is the wiring and plumbing acceptable or a fire hazard?
- Is there evidence of current mold and/or water damage?
- Does the property have any signs that it was used as an illegal dumping or drug-manufacturing site?
If an investor decides to tackle a fixer-upper investment, he/she should take the following advice to heart, as it will ultimately offer some pocketbook protection.
- Always look at a home’s neighborhood. When a renovation is complete, it’s unwise to have the most expensive home in the neighborhood, as this is a profit-less investment.
- Always purchase a home with good structural “bones,” as poor quality construction is often associated with costly long-term repairs.
- Select a fixer-upper that requires cosmetic fixes instead of a property that that has a failed septic system, cracked foundation or severe termite damage.
- Consider managing renovation projects so they are done simultaneously to help avoid excessive monthly carry over costs.
My Hard Money Lenders offers extremely competitive hard money loan terms, in addition to fast loan funding. As a direct lender, they feature loans that are ideal for fixer-uppers and investments.