Before stepping into the world of house flipping, take a look at these things to consider before investing your money and purchasing a fixer-upper.
Picking The Right House In The Right Area
Think about this, if you're going to purchase a property with the intention to flip, you want to make a decent profit. However, if you buy in a neighborhood that has numerous fixer-uppers, keeping in mind that a home's price is based on the others around it, it's possible that you might not make much of a profit. This is why finding the home that needs TLC but is in a pretty good neighborhood is ideal.
When buying any home, you're going to want to do a home inspection. Fixer-uppers are no exception. With homes that need extra work, you want an inspector who knows what the problem areas are. Take a look at these examples:
- Structural Engineering: That crack in the wall could be a minor issue or cause structural damage that ends up costing thousands of dollars to repair.
- Septic Inspection: As a home ages so does the sewage system. Make sure to check to see how the home sewage system is holding up.
- Pest Inspection: With all the various insects that can damage properties, don't skip out on getting a pest inspection.
- Roof Certification: Roof inspections can reveal the lifespan of a roof.
Review Needed Repairs
Consider ALL the repairs that need to be done. Don't just think about cosmetic changes (i.e. paint, new carpet, etc.) but those major jobs that may require hiring professionals. If you find yourself having to do more "major work" than cosmetics, you might what to re-evaluated purchasing that specific property.
After all the searching and evaluating, you finally found the house that you want to invest in! NOW is the time to make an offer! Put together a list of all needed repairs along with the associated costs to determine your acquisition and repair costs.
While making your offer, consider the following;
- Your offer (which includes renovation costs) shouldn't be greater than the amount you could expect the upgraded home to make. Remember, at the end of a house flip, you want to be able to walk away with making a profit.
- If you received a mortgage to fund your investment, make sure you're able to afford your monthly payments, holding costs, AND all ongoing renovations.
- Once again, you want to go over ALL the renovations that need to be done on the property. If the costs are more than you could afford at the moment, shop around for mortgages that will allow you to finance the needed repairs along with the home listing price.
Finally, the time has come to put in your offer. Once your offer gets accepted and you make it to closing day, you've now entered the world of investing! Congratulations!
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