Fixer Upper Homes - Are You Ready
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Are You Ready for a Fixer Upper Home?
Fixer upper homes offer a unique opportunity to purchase a property at a lower cost, even in pricey areas. For example, in Tucson, a small home typically costs over $200,000, but one investor found a fixer upper for just $35,000. Tempting as it may be, there are crucial factors to consider before jumping in.
Key Questions to Consider
1. Are You Prepared for the Challenge?
You don’t have to handle all the repairs yourself, but you will need to manage contractors and cope with inevitable surprises. Renovations rarely go perfectly, and unforeseen issues are common, so evaluate your readiness to take on this responsibility.
2. Is the Potential Gain Worth the Effort?
Imagine investing a total of $125,000 in a fixer upper that, when completed, is valued at $145,000. Is a $20,000 equity gain sufficient compensation for your time and stress? Only you can decide what makes the investment worthwhile. Approach this like an investor, as illustrated below.
Pricing a Fixer Upper
When assessing a fixer upper, list all the necessary repairs and improvements to make it a comfortable home. This might include a new roof, carpeting, paint, and various repairs.
Enlist the help of a real estate agent or appraiser to estimate the home’s potential market value once renovated. This is your target finished value. Here's how to calculate your offer:
1. Projected Finish Value: $179,000
- Renovation Costs: List all repair costs. For instance, carpet, wall repairs, yard work, painting, a new door, new appliances, etc., might total $12,000, assuming some DIY work.
- Holding Costs: Consider interest on the loan, taxes, insurance, and utilities while the property is uninhabitable. Let's assume $2,000 for these expenses.
- Unexpected Costs: Set aside an additional $2,000 for unforeseen issues.
2. Determine Your Profit Goal: Decide what equity gain makes it worthwhile. If $13,000 is your target, subtract it along with other costs from the finished value.
Subtracting the renovation, holding, unexpected costs, and profit goal from $179,000 leaves you with $150,000?"this is your maximum offer.
For room to negotiate, consider offering $144,000. If you can't secure the property for $150,000 or less, it might be wise to walk away.
This is your essential guide to purchasing fixer upper homes. With careful planning, these properties can be rewarding investments.
You can find the original non-AI version of this article here: Fixer Upper Homes - Are You Ready .
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