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Investing in a Fixer Upper
Generally speaking, there are two kinds of fixer uppers: major and minor.
Minor fixer uppers are properties that require only cosmetic repairs such as paint and floor resurfacing. These projects typically cost less and therefore increase your profit margin. They are also the kind of project that you could probably do yourself.
Major fixer uppers will need repairs for the house's physical structure. This could mean anything from plumbing to wall replacement. More often that not, these kinds of repairs will require professional services, and perhaps some permits.
Once you understand the two basic types of fixer uppers, you're ready to learn how to invest in them. The first thing you should do is determine your goal for your project. If you plan on selling the property after you've fixed it up, then you are considering flipping. The other option is to make the repairs with the intention of keeping the property to rent it out.
Flippers seek an immediate return on their investment upon the closing of the sale. On the other hand, over time, the return renting the property may be greater.
Renters can afford to space out their profits over several years. Because of this, they stand to profit more from their investment compared with flippers. Either option, though, will require you to consider three things when undertaking your fixer uppers investment:
Property market value
Know how much you can ask for the property after you've made all the improvements. This is basically assessing the potential selling price.
Repair costs
There are several financing options (credits cards, equity loans) depending on how much improvements and repair you intend to make. Consider whether you will do the repairs yourself or hire a contractor to do them for you.
Ownership price
In making your offer for the property, apply this formula: Take the potential selling price of the property after repairs and subtract repair costs and an additional 10% (as buffer for unforeseen costs). This will give you an idea of how much you should offer when buying the property.
These should get you started on your way to investing in fixer uppers. The trick is to make the right improvements to raise the property's value to a price that can fetch you a profit.
Learn about... Strategic Geographic Area
Location is one of the most important factors that you should consider when buying a fixer-upper home. The location of your fixer-upper home should be geographically strategic not only for your convenience but also for financial stability. Strategically located fixer-upper homes are easier to resell and will sell for a higher price compared to those that are located in less appealing areas.Fixe. . .