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Last Updated: May 14th, 2012 - 22:24:01 |
How can you evaluate the profitability of your real estate investment after purchasing fixer upper homes?
Today, with the high appreciation rates, the low mortgage rates and the low inventories of dwellings for sale, fixer uppers are making almost as much money as the house that is not a fixer.
So what do you look for in your real estate leads to ensure a wise choice for a fixer?
To begin with, before jumping into a fixer upper project, you must do your homework. Be objective about your potential. Primarily, you must consider: 1. the purchase price; 2. home improvement cost; 3. the monthly mortgage loan costs until resale; and 4. your expected selling price.
When remodeling homes it is hard in advance to know the cost without consulting professionals unless we ourselves are seasoned expert. That is okay. Hiring a few specialists is inexpensive and cost effective compared to the profits from the fixer.
So how do we evaluate the investment properties before we buy them? Which home improvement design consultants should we hire? And, what are some probable costs incurred when undergoing home remodeling?
Initially, you should methodically evaluate cheap mortgage leads to become preapproved for the best mortgage rate that you can find. Then, you will know just what price you can afford to buy at.
Next, you comprehend the best starting neighborhood for a profitable fixer upper that is the high priced neighborhood, one in high demand. You should study the comps, (the comparable sales information) for that neighborhood.
Now you are ready to find a real estate franchise as the first hired expert to assist you in finding that particular investment home. In most states, you pay the real estate agent no money. Yet, they are not free. The seller usually pays all of your realtors’ fees at closing.
Next, you pre-select your prospective real estate leads and quickly bring inspectors there to scrutinize the property. The roof and foundation should not need replacing; but, if they do, negotiations with the seller may lower the sales price by half of the fixer’s repairs.
When remodeling a home with extensive damages, another expert you may want to use is an architect, one who is familiar with the building guidelines for your particular city. Otherwise, getting approval for any large remodeling job; such as a basement remodeling might become a lengthy process.
Finally you use a mortgage calculator to estimate the profits your potential investment home may bring in after all of the costs are deducted. Be realistic about the remodeling home costs. Always consider the highest likely costs to cover for any sudden expenses.
Are your mortgage calculators telling you to save money by not hiring any contractors to repair your fixer upper homes? If so, consider two factors: How deep are your skills? And what is the worth of your time? Take heed, because if your skills are lacking, you could generate more problems and further expenses by attempting home improvement contracts that someone else who is more trained should be doing.
Even if you have some experience, maybe in bathroom home improvement or another skill, how valuable is your time? Is it more profitable to use time to fix a toilet or could we make more money by being out flipping investment properties, When negotiating home improvement contracts, if the contractor charges $60 per hour, but you usually make $100 an hour flipping properties, then it behooves you to be out flipping investment homes and let the contractors earn from their own expertise.
To budget further, we may do the interior home decorating while living in the property ourselves. Meanwhile, the investment home should appreciate over time. You will accrue appreciation while your home improvement renovations add to the future sales value. So, either way, enjoy yourself and simplify stress by having a well-planned adventure, while you earn good money by working with and reselling fixer uppers.
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