A fixer-upper is a smart choice, if you are looking to buy a house that you can 'flip' (fix and then resell for a profit) or if you are just searching for something that's a great deal. When you buy something that needs a lot of work, it will likely be cheaper, plus you can opt to renovate it and then sell it so that you can gain from it. Below are a few tips that will enlighten you about fixer uppers so that you can consider this option more thoroughly.
1Fixer Uppers Can Be Bought Cheap
There are properties for sale that require a lot of work, and such are often called fixer-uppers. For some reason, the owners of these kinds of houses have not been able to maintain these well. For an owner to make a fixer-upper home livable, major work needs to be done. Nevertheless, there are others that only require a little work. If you are thinking about becoming a landlord, then a fixer-upper will be a good bet.
2Home Buyers Prefer Fixer-Uppers
Some home buyers prefer fixer uppers because these are still quite cheaper, even after repairs, compared with a property that's been well-maintained. Because of this, some landlords buy fixer-uppers, and they do the repairs on their own before renting these out to tenants. The landlord could opt to do only minor maintenance, like fixing the plumbing or doing some carpentry work. However, major jobs, like fixing or replacing the roof or installing the furnace or HVAC system, require the help of a professional.
Cosmetic repairs, like repainting and carpeting, will also do wonders in improving the look and ambiance of a modest fixer-upper. Moreover, appliances, new windows, and great landscaping can make the place so much better and more desirable to would-be tenants too. Also, remember that there are many ways to find a rental property.
3Finding Good Investments
Landlords utilize many different ways to discover properties that they consider as good investments. They take the time, and they are also quite adept at searching for "For Sale" signs in places where they want to buy a property. Some even use real estate agents in finding properties, or the landlords will do the online search on their own.
Foreclosures are particularly cheap as the value of these properties is often below the average market price, and these will be great as rentals too. Some investors buy such properties and then turn the previous homeowners into tenants. This can be a good thing for the former owner who may currently be in a dire financial situation. But, more likely than not, the previous owners who were not able to pay their monthly mortgage fees will not make the monthly rent payments too.
Another great source of leads is the properties that have lots of vacancies. Investors approach landlords who seem tired of maintaining such properties and constantly finding good tenants, and the former convinces these landlords to sell the properties to them. A landlord who has lost interest in the business won't be too hard to persuade in such cases.
4Fixer-Uppers Can Give Bigger Profits
Fixer-uppers are more affordable, which means that investors will make a more significant profit by buying a house with a lower selling price and turning it into a rental. These structures are convenient, cheap, and these already offer the most basic needs of anyone who needs a place to call home. The landlord can also choose to charge a lower rental fee and still make an excellent profit because he only requires a lower capital for purchase and maintenance.
5Advantages Of Buying Occupied Properties
There are certain advantages to buying a property with current tenants; for one, you will readily get access to financial records that you can evaluate. Based on the data you get, you can tell if the property is making money or not. You can review how much income it brings in and how much the operating costs and other expenses are. From the records, you can also see how useful the rent collection is.
Based on the financial data, you can also estimate how much investment you need, which will also help you in determining possible income from the rental property. It's also a must to check if the owner keeps tax records. These documents are quite simple to collect. Usually, landlords are quite willing to provide such records to serious potential buyers.
6The Importance Of Financial Records
The financial records of the current landlord will give you a glimpse about the status of the property. Whether it's been maintained well or not, or whether there are issues that will likely need costly repairs. Such information is indeed valuable when it comes to predicting possible income, as well as potential costs related to maintenance and repairs.
The second advantage is that a rental property will already have a paying renter. Perhaps you may not have chosen this person as a tenant, but at least there will already be someone paying the fee, which will augment your income. When weighing your options, only consider spending an amount that you can readily recover in two years.
7Calculating Investment Costs
As an investor, it is but natural to go for something very affordable. When calculating the possible cost, keep in mind that there are also local laws, regulations, or codes that will also determine the amount. Perhaps, you will only need to shell out money for smoke detectors if you are thinking about buying a property that you want to rent out. After purchasing the smoke detectors, you can do the installation on your own; hence, the conversion cost is quite low.
However, other properties may require the installation of additional outlet boxes, service meters, and others. This will need the services of a licensed electrician, which will probably cost around $2500. In case you can recover the cost for the new wiring network in two years, it will be a wise investment.
Hopefully, all the information above has helped you in deciding whether or not a fixer-upper property is the best and wisest option for you. In case you are still having doubts, perhaps you should go and check out a few fixer-uppers. While on your visit, you will be able to visualize how things would look once work has been done. All in all, this is an excellent way to earn more income, so maybe you should try it out.