How to Avoid a Money Pit: Picking a Profitable Property
If you’re considering purchasing a fixer-upper as your next home or investment, it’s important to approach the decision with caution. What may seem like a simple project could quickly turn into a costly and time-consuming money pit. Here are a few key considerations to help you make an informed choice.
When buying a fixer-upper, experts recommend focusing on homes that need cosmetic improvements rather than extensive structural work. Cosmetic updates—like painting, flooring, or kitchen upgrades—are generally more manageable and budget-friendly. In contrast, structural changes often escalate in cost and complexity, leading to unexpected delays and higher expenses. Additionally, while structural improvements are necessary for habitability, cosmetic updates tend to provide a better return on investment.
Estimates and Costs
Before making an offer, carefully estimate the costs of the renovations. A thorough assessment of the property’s condition, preferably with the help of a home inspector, is crucial. Your real estate agent can also provide valuable insight into the neighborhood’s market trends, including comparable home prices, local schools, and overall property values. Be sure to budget conservatively, including both labor and materials, and consider any potential unforeseen issues—experts suggest factoring in an additional 5 to 10 percent for unexpected problems that may arise. There are plenty of articles to help you get an idea of costs for various projects like this one from Freshbooks.com.
Once you have a clear picture of the estimated renovation costs, subtract this from the home’s projected market value after the improvements. This will help you determine a fair offer price. It’s important to make sure that the final value of the home, after all the work is completed, will leave you with a reasonable profit margin.
Work With Trusted Experts
Working with trusted experts throughout the process—whether it’s contractors for labor, materials, or valuing the home post-renovation—will ensure you make an accurate and informed offer. We would be happy to help you with our recommended vendors for all your projects. And remember, don’t skip the home inspection, as it can uncover hidden structural issues that could diminish your potential profits. Even new construction can have issues.
Purchasing a fixer-upper can be a smart way to save money and create value in a home, but it requires careful planning and expert guidance. With a thoughtful approach and the right support, you can successfully navigate the process and achieve your investment goals. Contact us to help you along in the process. We are happy to help!
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Your caring Realtor®,
Amber
