This article will outline some of the considerations you should make as a potential buyer, and also answer a few basic questions about finding and purchasing fixer upper homes. Lastly, we give you four reasons to find fixer upper homes for sale, as well as some suggestions on what to look for when checking out fixer upper homes for sale. Read on to learn more.
Why Consider Fixer Upper Homes for Sale?
TV shows such as HGTV’s Fixer Upper have brought a lot of mainstream attention to flipping houses and properties, as the show’s hosts make it seem relatively easy and rewarding to buy distressed homes low, do a few repairs, and make a tidy profit by reselling them or renting them quickly. The process is, of course, more intensive and time-consuming than television programs would lead you to believe but finding and flipping fixer upper homes for sale can be a very lucrative business.
That said, because of the potential margins, it can also be a very competitive business depending on the local market. If you are planning to get pursue fixer upper homes for sale in your area, it’s important that you familiarize yourself with purchase, permit, and potential repair costs as much as possible before you start making offers on homes.
What to Look for in Fixer Upper Homes for Sale
One thing to keep in mind when checking out fixer upper homes for sale is to look for homes that are not overly distressed. In most cases, you will also want to avoid homes with excessive structural issues. A fixer upper home may look good in theory, but if it’s not cost-effective to make the necessary repairs or improvements, then you’re simply taking on a problem project and setting yourself up for a financial loss. If you plan to do most of the repairs or improvements yourself, you need to make sure that the issues connected to the home or building are within the scope of your repair capabilities. For example, if a home has excessive plumbing or water issues and it will cost you thousands of dollars in mold remediation and repair costs, you lose a lot of the purchase value if you have to outsource the work to a professional.
A common problem that many ambitious home-buyers run into is that they aren’t honest with themselves about the amounts of time and money that will need to be invested to see a return on their initial investment. It’s important when assessing fixer upper homes for sale to maintain a strong degree of objectivity and to not bite off more than you can chew in terms of repair costs and time investment. With this in mind, the ideal fixer upper homes for sale are those that primarily need cosmetic improvements. Painting, drywall, light fixtures, and so forth constitute cosmetic issues that can be addressed quickly and relatively inexpensively. The issue here is that flippers are constantly scouring markets for homes such as these, and there will often be intense competition for fixer upper homes with mainly cosmetic issues. The next type of home or property to target would be a home that requires a few major additions to meet a neighborhood standard.
For example, if most of the homes in a neighborhood have a connected back patio and a given property does not, a buyer would likely need to pay for this addition in order to raise the home’s property value to a profitable number. Additions can be costly in terms of both money and time, but there is room for healthy profit if a buyer is selective and smart about what the home will need to meet the neighborhood standard. Homes with major structural issues are often more trouble than they’re worth in terms of time and money. Because housing markets can fluctuate so much, it may be difficult to project a home’s value if a reconstruction project takes many months to complete.
As you examine fixer upper homes for sale, it’s in your best interest to take a home inspector with you prior to making any offers on a home, as a good home inspector can give you an honest, upfront assessment of what a fixer upper home will require in terms of cost and time investment. In short, when looking at fixer upper homes for sale, it’s best to look for homes in which you can complete most of the repairs yourself, and those that you can turn around in a relatively short period of time.
Where to Find Fixer Upper Homes for Sale
To start, there are a number of websites dedicated to fixer upper homes for sale such as foreclosurelistings.com. These websites compile distressed or foreclosed homes, and provide photos, asking price, and contact information for interested buyers. Buyers can watch websites such as Zillow for buy-low opportunities, and many home-flippers develop and maintain close relationships with local real estate agents in the interest of getting a leg-up on opportunities. There are numerous ways to find or locate fixer upper homes for sale, and this is one area where ingenuity plays a factor.
Browsing internet listings is a common and easy method for finding fixer upper homes for sale, but you’ll likely find yourself in rat races and bidding wars for the most-attractive properties. Like any other market, identifying a market inefficiency and investing smartly are keys to turning a profit on a fixer upper home. Using your unique thought process to find an ideal fixer upper home for sale is probably the best and most profitable approach in the long run.
4 Reasons to Find Fixer Upper Homes for Sale
1. People Always Need Housing
One of the main reasons that so many people get into real estate or property management is that there is always a need for housing. While economic downturns can cripple many other markets – and no buyer wants to be really upside-down on a property purchase – there will always be a demand for housing at various price-points. This can make a decent, low-cost property a potentially strong investment.
For those who plan to flip their fixer upper, ATTOM Data Solution reported that the average gross profit of a housing flip in 2016 was a bit over $62,000. This marked a 3% increase over 2015.
2. Passive or Residual Income
We all understand what constitutes active income: money earned for labor or services rendered. And while there is nothing wrong with active income, passive or residual income often gives you time flexibility that simply can’t be beat.
Buying a fixer upper home and renting it out can be an excellent source of passive income, as many homeowners are able to rent properties or double or even triple or what they owe on them. Moreover, while homeowners or landlords will always need to put in a certain amount of active work (repairs, collection, property management, etc.), collecting a chunk of money every month for simply owning a property is a very enticing way to bolster income.
3. You Have Creative Control
One of the more idealistic aspects of finding fixer upper homes for sale is that you can create the type of house that you would want to live in. For example, if want to distinguish a home with a skylight or an elaborate kitchen island, you have carte blanche to do so. Similarly, if you want to invest more money into the bathrooms and less into the basement, that’s also the decision of the homeowner.
There are always practical and cost considerations, but one of the more attractive elements of buying and selling fixer upper homes is that you can construct and shape the home exactly the way you want. This applies whether you intend to keep the home as your own or rent it out.
4. You Can Get a Great Deal
Whether you plan to rent out the home or live in it yourself, one of the strongest reasons to consider fixer upper homes for sale is that you can purchase a home for well under market value – as much as 20-25%, in some cases. This not only makes the home a better long-term investment but buying low on a home can save a buyer a good deal of money right up front.
You will need to maintain pragmatism and factor repair or upgrade costs, but fixer upper homes often present a great opportunity for profit or savings.
There are Many Reasons to Consider Fixer Upper Homes for Sale
As explained above, there are a lot of reasons to consider finding fixer upper homes for sale, whether you’re an aspiring real-estate mogul or if you simply want a better home for yourself and your family. Fixer upper homes are certainly not without risk, but in many cases, dedicated people can build and design their dream home, often a greatly-reduced cost compared to market price.