Every real estate investor knows that it is possible to find a real estate investment gem by investing in a fixer upper. So, should you go out, buy a fixer upper you’ve had your eye on, and jump into the home improvements right now?
Slow down! Before investing in a fixer upper, there are questions you need to be asking. Investing in a fixer upper requires answering questions from two groups:
- Questions to Ask About a Fixer Upper Investment Property
- Questions to Ask Yourself: Are You Ready for Investing in a Fixer Upper?
The answers to these questions about investing in a fixer upper will cover home improvements, home remodeling, and the investment property value. They will allow any real estate investor to determine if he/sh is ready for buying a fixer upper and taking on the home improvements. Let’s get started:
Questions to Ask About a Fixer Upper Investment Property
Will the fixer upper benefit from its location?
Location is a factor real estate investors need to consider for every single real estate investment property they look at. First, know the condition of the real estate market in the location of the fixer upper. Is it prospering? Is it a good time for buying a fixer upper in that real estate market?
Related: Location Location Location: What Makes for the Best Place to Invest in Real Estate?
Next, find real estate comps in the same location by conducting real estate market analysis. These real estate comps should include investment properties that let you know the current value as well as ones that will give you a good idea of the after-repair real estate market value. Because real estate investors can focus too much on this real estate market value, they may not realize that they’ll end up with an overpriced fixer upper after the home improvements and home remodeling are complete. Overpriced fixer uppers won’t sell in any real estate market. Make sure this doesn’t happen with the investment property you’re investing in by knowing the real estate market well.
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Finally, investment property analysis will determine if the specifics of the location will affect the value of the fixer upper. If a fixer upper is in a bad location, there is no need to even continue answering the rest of the questions about it. Move on and find another fixer upper that will make a better real estate investment.
What kind of fixer upper will you be dealing with?
Real estate investors and realtors lump together a range of investment properties under the title of fixer upper. In reality, there is a spectrum of home improvements on fixer uppers that can change the entire fixer upper investing game for the real estate investor. A fixer upper in need of cosmetic home repairs like new paint, carpeting, or a few new fixtures won’t take up as much time or money from the real estate investor.
However, larger home improvements or home remodeling can turn a fixer upper into a real estate investment project. If a real estate investor is not aware of and fully prepared to take on these kinds of home improvements beforehand, buying a fixer upper can be a nightmare. It can even turn into the worst real estate investment and cost a real estate investor tons of money.
How long ago was the home inspection done?
Real estate investors are often handed a home inspection report for a fixer upper. It discloses all the home improvements that have been done and any home repairs that need to be done. How recently did this fixer upper have a home inspection? If it wasn’t within the last year, consider getting an updated home inspection on the investment property.
How thorough was the home inspection? Inspectors can miss things during home inspections. If you notice anything off, get your own home inspection done.
Sometimes, owners of fixer uppers will have conducted home repairs or home remodeling on their own, without professionals. On the home inspection report, it’ll show up as a home improvement and might even add to the price. Real estate investors should definitely be wary of this when investing in fixer uppers. It’s possible that the owner made mistakes or did a poor job on these home improvements. You could end up paying for it unexpectedly in the future.
Will the local authorities hinder home improvements on a fixer upper?
Real estate investors sometimes have big plans for home improvements for a fixer upper. Regulations and laws from local authorities can quickly change these plans. A lot of kinds of home improvements require permits or are just not allowed at all. For example, any additions to the house, changes in the floor plan, additions of outbuildings, or even fencing all need to be cleared with local authorities.
These regulations can even affect the investment strategy of a fixer upper. Plan on turning it into a quaint Airbnb rental? Want to expand your residential real estate investment portfolio and use a fixer upper for commercial purposes? It might not be allowed in the area.
Related: Cities with the Least Airbnb Legal Issues
Questions to Ask Yourself: Are You Ready for Investing in a Fixer Upper?
Do you have the money a fixer upper needs?
Qualifying for financing for buying a fixer upper isn’t too much of an issue. As long as the fixer upper is decent and has hope of being a good real estate investment with some home repairs, you’ll have no trouble. The money real estate investors need to worry about comes from homes improvements. Make sure to get estimates for all of the home repairs for a fixer upper. Plan a budget, with extra leeway from these estimates, just in case any surprises pop up during home improvement.
Do you have the time to commit?
A fixer upper and its needed home improvements are going to take up all of your free time: weekends, weeknights, and even lunch hours you can get away from the office will be spent on a fixer upper project. Are you willing to sacrifice this time for a fixer upper?
Do you have access to a support team?
Real estate investors might find that they need support when handling home remodeling of a fixer upper. While cosmetic home repairs are simple, buying a fixer upper with major issues might mean needing good contractors, a real estate agent, and a real estate network to get the job done successfully.
Related: Build the Dream Real Estate Investment Network in No Time
Are your expectations realistic?
Fixer upper and home remodeling shows have given many beginner real estate investors the idea that a fixer upper will be easy to repair and benefit from quickly. This is not the case with a lot of fixer uppers, and you have to accept that. Be prepared for the sweat and toil that come from home improvements and home remodeling when investing in a fixer upper.
Once you’ve answered all of these questions about a fixer upper investment property and its home improvements, you should have the answer to the final question: Should I start investing in a fixer upper investment property? It will depend on you, your investment goals, the real estate market, and primarily the investment property you’re interested in. Choose the right fixer upper, conduct the home repairs, and you’ll have a great real estate investment property on your hands.
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