Buying a “Fixer-Upper”

For people that are looking to purchase a “fixer-upper” a must watch comedy is “The Money Pit.” A hit, cult-classic starring Tom Hanks and Shelley Long, this 1986 movie highlights the comical horrors of renovating a dilapidated home.

No one is saying that fixer-uppers aren’t a value. In fact, they often allow investors to purchase homes that require some much-needed tender love and care. However, these types of homes are not for the faint of heart real estate investor because they can quickly add up to a burdensome expense.

In order to quantify if a fixer-upper is worth purchasing as an investment, investors need to be honest with themselves. Yes, the right, carefully selected, fixer-upper offers rewarding profits, but an ill selected one, can rack up costly, expensive bills.

One of the most common mistakes investors make is thinking they can tackle the challenge themselves. Unless they’re a licensed contractor with expansive experience, this goal is far from reasonable. For investors looking at the glamorous side of do-it-yourself fixer-uppers, consider the costly expense associated with tools. Even renting tools can lead to long-term expenses that cut into profits.

If looking at purchasing a fixer-upper, always obtain a home appraisal and have a thorough home inspection. Updating the aesthetics of a properly only goes skin deep. It’s often what lies under the surface that can rapidly add up to big-ticket expenses. For example, does the home need a new roof? Is the plumbing and wiring sufficient? Is the foundation in good condition? Is there evidence of current water or mold damage? Additionally, in some areas meth labs are an issue and cleanup can be extremely costly. Visit local health departments to obtain information about what signs to look for when examining if a rundown home could be the site of a known or pending investigation drug lab.

If investors decide tackling fixer-upper investment is up their alleys, there are some helpful tips to consider:

• When purchasing a home below market value, always look at the neighborhood. Investors never want the nicest house in the neighborhood, as it will be impossible to recoup monies from the investment.
• Purchasing a home with good “bones” and quality construction will help avoid the repairs often associated with poor or inferior construction.
• Focus on choosing a fixer-upper that simply requires cosmetic upgrades instead of major repairs and projects. Updating a kitchen is far less expensive than replacing a foundation or a failing septic system.
• Consider the length of time each project will take. Can these projects be accomplished simultaneously to save time and money? After all, monthly carry over costs should be factored into expenses.

Better Than Loans offers competitive hard money loan terms and fast loan funding. As a direct lender, they offer an excellent alternative to traditional banks that will not loan on fixer-upper homes and investments.