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There are multiple reasons why you might be considering purchasing a fixer upper. First, it’s one of the cheaper ways to get onto the property ladder. If you buy a fixer upper, you will need to pay a smaller mortgage and this also means that you won’t need to save a massive deposit.
Of course, the main reason people tend to buy fixer uppers is to flip them. Flipping a fixer upper can bring an absolutely massive level of profit if you approach it the right way. To do this, you need to make changes to the home to ensure that it’s ready to be marketed at a price higher than you originally paid. You can then sell it on for a semi-honest profit. This can be a great side hustle, or a full business venture, depending on how successful you are here.
Avoiding The Thorough Checks
One of the first mistakes that you can make when investing in a fixer upper is failing to complete the right checks. The issue here is that it can mean that you miss a lot of the damage which the home has. For instance, if you don’t complete a thorough check, then you might miss the fact that a home has asbestos in the walls. Up until about the 1980’s and in some cases a lot later than this, asbestos was being used as an insulator in homes. We now know that it is incredibly dangerous and will need to be removed. Unfortunately, removing it from a property will cost thousands and this is going to leave you at a significant disadvantage with your fixer upper purchase from day one. You can’t leave the asbestos either. If it’s revealed in a buyer survey it will mean that the home becomes unsellable. Furthermore, if a buyer asks outright if a home contains asbestos, then you have to provide them with an honest answer.
Failing To Hit The Floor
If you are buying a fixer upper to sell on, you need to ensure that you are purchasing it for the floor asking price. The benefit of doing this should be obvious. It will make it a lot easier for you to make a profit when it is time to sell. The problem is that it can be quite difficult buying a property at the floor price. This is the absolute minimum price that an owner will sell a property for. It’s largely going to depend on the state of the property, the individual situation of the owner and the situation on the market. For instance, if the housing market isn’t healthy, the owner will want to sell as quickly as possible and this means that the floor price will be lower. It will also be lower for those who have inherited the property from a relative and don’t want the hassle of keeping it on. You need to recognise the signs that an owner is looking for a fast sale. One example of this would be if the home has been cleared out. This suggests that an owner is already living in their new accommodation. If that’s the case, the home is just going to be a massive drain on their finances so you can jump in with an offer that they’ll be desperate to accept.
Forgetting To Work Out The Budget
Now, let’s think about the budget for buying your fixer upper. Your starting point here should be to check out an FHA mortgage calculator. This is going to tell you the down payment you need for a property and how much you will need to borrow to cover the total cost. Don’t forget, a loan to buy a property you’re going to flip is different. It doesn’t matter if the interest rate is high because you should be aiming to sell the home in just a few months. Essentially, you should buy the home at the start of the year and prepare it for the market by late spring or early summer.
Beyond the mortgage and the deposit, there’s a lot more that needs to be included in your budget calculations. For instance, you need to think about marketing the property. You won’t be able to do this yourself. Instead, you will need to ensure that you hire a real estate company to ensure that your property does get the right attention and sells quickly. You should research the cost of this service before you buy.
You will also need to decide which jobs you’re going to need contractors for and which ones you will be able to complete yourself. You’ll find that there are multiple renovation jobs that are too complex to handle. Finding the right contractor for the right price will be key to getting the home prepared for the market.
Forgetting About Quality
Finally, if you are going to flip, you need to make sure that you are able to provide the quality that buyers expect. If you make cheap or low standard changes to a home that you want to sell on the market, then you are never going to get the attention that you need from buyers. This is another clear reason why you must make sure that you are finding the right contractors to help out.
It’s important to understand that when you buy a fixer upper you are taking on a massive risk with an equally massive potential for rewards. You need to be cautious and take your time with repairs. As well as this, you have to guarantee that you are working to the right deadline. Remember, the longer your home doesn’t sell, the more expensive it becomes for you. As such, it’s in your best interest to get it on and off the market as quickly as possible.
We hope this helps you understand the right steps that you will need to take when selling a fixer upper and some of the key mistakes that you should definitely avoid. If you take this advice, then you will see the benefit that you want from this choice.