Buying a fixer-upper can be a fantastic investment. They tend to be much more affordable than houses that aren’t in need of many renovations or repairs.
And the money you save should cover whatever repairs and renovations are needed, not to mention that you’ll be able to have more say in the look and design of the home as you remodel it.
Buy it to flip it?
Many buyers will purchase fixer-uppers with the intention of flipping them for a profit.
However, not every fixer-upper is a great deal. If you’re not careful, you could end up in a money trap.
If you’re going to invest in a fixer-upper, whether it’s to flip the house for a profit, to rent the house out, or live in it yourself, make sure that you keep these four things in mind before you decide to buy.
# 1: The Location
Location, location, location as they say.
Make sure it’s located in a neighborhood that’s worth investing in. There’s no point in investing thousands of dollars fixing up a house in a neighborhood full of abandoned buildings and overrun by criminal activity.
It won’t matter how beautiful the house looks after the renovations if the surrounding area is unlivable and no one wants to live there.
Let's look at this example. You are looking at a gorgeous home online located in town you want to buy. The home itself was beautiful, but it was located about 200 yards away from the railroad tracks.
If you’re going to buy a fixer-upper, make sure it’s in a neighborhood where buyer demand is high. And never, ever, ever buy the nicest home on the block, because your house’s value will be driven down to match the value of the homes in the neighborhood.
# 2: The Floor Plan
Pay attention to the floor plan.
If the kitchen is upstairs and the only bathroom in the house is in the basement, you’re going to have to do some serious remodeling in order to remedy this.
You’re going to end up having to invest a ton of money into remodeling the house in order to change the floor plan.
# 3: The Configuration
The number of bedrooms and bathrooms matter.
It’s the biggest deal-breaker for any buyer.
A three-bedroom and two-bathroom fixer-upper is going to be a lot easier to flip than a two-bedroom and one-bathroom.
Keep this in mind when looking to buy your next flipper.
#4: The Condition
Yes, I get it. The point of a fixer-upper is that you are buying a house that needs repairs., but that doesn’t mean that the condition of the house doesn’t matter.
There’s a big difference in buying a house that needs to be repainted and buying a house where the roof needs to be replaced. Certain repairs are going to cost way too much, making the low price of the house totally irrelevant.
There are three things you’ll want to look for in every fixer-upper that you consider:
- The foundation
- The roof
- The HVAC & Plumbing Systems
If any of these three things are in poor condition, odds are that you’ll be better off not investing in that particular house.