Investing in Renovated Properties for Sale: Is It a Good Idea?

When buying an investment property, renovated properties for sale might sound like a great idea. However, is that really the case?

Well, I guess there is no right answer to that. In fact, there are only the facts and the rest is dependent upon your own decision and finances as well.

Related: What Is the Best Type of Investment Property in the Real Estate Market?

So, before you decide, let us help you make up your mind. In this article, you will read about both the pros and cons of buying a renovated home and what to consider before deciding. So, without further ado, let’s get right into it!

Investing in Renovated Properties for Sale: Is It a Good Idea?

The Pros of Buying Renovated Properties for Sale

Buying a house to rent out is perhaps one of the best investment ideas there is. And a renovated property for sale might be a good candidate for that purpose for many reasons.

First of all, renovated homes require a minimal amount of work upon purchase and typically during ownership. The reason is, obviously, the previous owner has renovated it already and it should only require light maintenance for a few years.

The second good reason for buying renovated properties for sale is the easy transition. With a house that already had all the work done, you can list your property for rent right away. This, of course, allows you to start receiving a rental income from the property as soon as possible.

Third, easy financing is what we all are looking for. There is nothing worse than being rejected for a mortgage application due to the lack of guarantees. Thus, renovated properties for sale are one of the most guaranteed real estate investment strategies in the market. Unlike a fixer-upper which requires remodeling and maintenance, a renovated home has a fixed property value. Mortgage lenders tend to see this type of investment property as a low-risk investment when compared to a property you plan to renovate yourself.

Other than that, what would be better than skipping the whole situation where you have to work with a contractor and be involved in the whole process of renovation?

The Cons of Buying Renovated Properties for Sale

Looking at the pros of investing in renovated properties for sale is all good. But what about the other side of the coin? Just like other real estate investment strategies, renovated homes have cons as well.

First, it is only natural for a renovated house to be more expensive than a fixer-upper. The way it works is that some real estate investors buy homes that need remodeling and maintenance. They buy it for cheap, renovate it, and then sell it for a higher price for people like you looking for a renovated house. So, what is included in the price? The renovation cost, the amount of forced appreciation in addition to a profit margin. Basically, you are paying for all that.

Second, unless you know what you are doing, it is easy to fall victim to fraud. Many so-called “investors” only perform minor changes to the property and then claim they have done major remodeling work. Therefore, you must be careful to avoid these types of real estate investment scams. This means knowing how to inspect the investment property to ensure that they’ve done what they said they have.

Related: The Most Common Real Estate Investment Scams

Third, renovated properties for sale might not be what you want them to be. We all have different tastes when it comes to design. So, with a renovated house, you can expect it to reflect its previous owner’s taste.

What to Look Out For in Renovated Properties for Sale

Now that you know the pros and cons and perhaps already made up your mind, here is what you need to look for in renovated properties for sale:

First: Check for permits/ license 

A useful piece of information to know is that many municipalities require a permit for property improvement. So, as the smart real estate investor you are, ask the owner to show you ALL the permits and formal documentation relative to the renovation.

Second: Check receipts and contractors

House improvements require that the owner hires a contractor. Therefore, this means that there are receipts and someone who was actually involved in the work. All in all, what we are saying is, look for proof that the improvements were as major as the owner says. In some cases, there have been renovated properties for sale which supposedly had major improvements that turned out to be minor changes.

The reason we are telling you to do so is that after a renovation, house prices go up. So, what SOME owners do is they claim to have done major renovations in order to sell the house for a much higher price. In reality, they might have only re-painted the house, changed a couple faucets, and concealed some of the defects of the investment property. So, you want to be careful about overpaying for renovations that never happened.

Third: Inspect the property

Aside from all the paperwork, it is important that you get a feel of the property as well. When you go to see the investment property, make sure to walk around and check things for yourself. Check all the faucets, the paint, the plumbing system in addition to the electricity system.

Related: The Ultimate Property Inspection Checklist for Real Estate Investors

However, checking for yourself does not mean you shouldn’t enlist the help of a professional inspector. It is always better if you hire an inspector and let them check for you. They will make sure you are paying for a good real estate investment.

Renovated properties for sale can be a great investment!

If you take all the above into account, renovated homes can be a great real estate investment. However, this does not mean that you don’t need to perform some profitability calculations as well. So, why don’t you check out Mashvisor’s investment property calculator? This amazing tool will lay it all out for you. Not only will you be able to perform investment property analysis, but you can also perform neighborhood analysis and most definitely find rental comps to which you can compare the property.

To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.

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