Plenty of reality television shows make buying fixer-upper homes and flipping them, or fixing them up and selling them for a profit, look easy and exciting. The actual reality of buying a fixer-upper is a little more complicated. Before you decide to buy the home, you want to know that you’re paying a good price for it, especially if you plan on turning around and selling it right away.
What to look for
When looking for fixer-upper homes, you want to ask the same questions and use the same criteria you’d use to buy a move-in-ready home. Find out about the neighborhood the home is located in. Ideally, you’ll want a home in a popular or desirable neighborhood, so that people will be more likely to want to buy or rent it when you’re finished fixing it up.
You don’t want a home that has too many issues with it. It’s a good idea to have a home inspection performed before you complete the purchase to make sure that there aren’t any major problems with the property. Fixing up cosmetic issues with a home, such as dated kitchen cabinets, is a lot less costly for you than having to repair a crack in the foundation. While structural repairs may be needed to keep the house standing, they typically don’t add much value to the home, since they aren’t visible.
Calculating the price
There are a few figures you should keep in mind when deciding what a good price for a fixer-upper is. Look at the sold price of similar, non-fixer-upper homes in the neighborhood. Then, calculate the cost of the renovations you’ll have to do on the home to bring it up-to-date and make it appeal to a buyer or renter. Add about 10 percent to the estimate, to give yourself a cushion in case things up end up costing more.
Think of the quality of the renovations, too, when considering the cost of them. Many of today’s flippers are pro investors, complete with crews to back them up. If you want to compete on that level, you might consider hiring a team to help with the renovations and include the cost of labor in your estimate.
Profits made from flipping homes vary from area to area. While the national average profit in 2013 was more than $90,000, in the Atlanta area, the average profit was only slightly more than $50,000, according to the Atlanta Business Chronicle. After you’ve deducted the cost of the repairs, subtract the estimated or hoped-for profit from the average sale price to find out a desirable amount to pay for a fixer-upper.
Flipping the house
It’s important not to get emotionally attached to the home during the flipping process. Do some of the work yourself, if possible, but also hire a contractor to handle the bulk of the projects. While selling the home might be the ultimate goal, remember that you can always rent it out until you find a buyer.
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