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A Closer Look at "Fixer-Uppers"
Fixer Upper or Budget Buster? Many of my clients initially express an interest in moving into a home that "with a little work" will result in a fat profit on resale. Although a few ultimately take the plunge, most quickly realize that these projects aren't for the faint of heart or weak of wallet. In hopes of helping the determined among you, here are a few hints to get you started. Fixer Upper Hint #1 - Take your entire collection of "How to Get Rich in Real Estate" videos and books, soak them in kerosene and use them as bug lights. If the process was either as simple or as lucrative as portrayed in the infomercials, the authors would be devoting every waking moment practicing it instead of peddling it for $39.95. Fixer Upper Hint #2 - The purchase of "fixer-upper" property is almost never possible with zero or low down payment government financing (e.g. VA and HUD). I say "almost" because there are two FHA programs where repair costs can be included in the loan. These are seldom used in Mountain Home so you'll want to work with a knowledgeable agent to learn about them. In most cases, a considerable, up-front cash investment will be necessary to purchase the property. Fixer Upper Hint #3 - Renovations will almost always cost more (usually much more) than you estimated, take longer than you planned and cause your family to experience the various stages of grief the entire time. Fixer Upper Hint #4 - Depending on the extent and nature of the renovations, a building permit and code inspections of the new work will be required. In addition, some repair items can trigger the requirement to bring existing systems and components into compliance with current building codes. Before making an offer, stop by City Hall and talk to the Building Inspector to avoid unpleasant and spendy surprises. Fixer Upper Hint #5 - Zealously avoid homes that need unprofitable repairs such as foundation work, major plumbing, electrical and the like. Try to find a home that requires only cosmetic repairs, updates or even a new roof. Fixer Upper Hint #6 - Don't become so focused on the physical condition of the home that you lose sight of other marketing factors such as location. Even an attractive, expertly renovated home will linger on the market if it's on a busy street or faces an eyesore. Bonus Fixer Upper Hint - Realize that when bidding on a home you're in competition with established, local buyers who make a good part of their living turning "distressed" properties. If an obviously troubled home has been on the market for more than a couple of months, it's safe to assume that it's been weighed and found wanting by some of those renovators. You'll want to know why. Line up those ducks before you pull out your wallet! "Due Diligence" at the front end will go a long ways toward a successful and profitable project. |
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This intel was contributed by jandg
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May, 2012
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