Buying a fixer-upper can be a good investment because, if things go well, you may be able to flip it for a hefty profit. However, it can be a nightmare if you buy a dilapidated house like Tom Hanks did in The Money Pit. Before you plop down your hard earned money on what could be a complete flop, ask yourself these 5 questions.
Is the Location Good?
The location is the one thing you will not be able to change, so make sure the property is a good one. Study the neighborhood and schools. Research the local crime rates. These things could make a difference in how easy or difficult it will be to sell the house after you've fixed it up.
Is It Structurally Sound?
Some of the most problematic things to fix in a fixer-upper have to do with the structure and foundation of the house. If the house is not structurally sound, you may have a difficult time getting the inspections from the housing authority to pass. Keep in mind that problems with structural integrity sometimes can only be found when walls are removed. There could be termites or water damage deep within the structure of the house. Are you able to save some room in your budget for these types of unexpected expenses?
Helpful tip: You can Get a C.L.U.E. to see if the house has a history of structural damage. This is a report of insurance policy claims filed by the previous homeowners.
Is the Floor Plan Good?
A good floor plan is one that allows for good traffic flow. Is the house easy to navigate through or do walls seem to be in the wrong places? It is possible to change the floor plan by moving a wall or removing a wall altogether, but this can get tricky if the walls are load-bearing. A home inspector can tell you which walls can be moved or removed to make the floor plan better. Also, pay specific attention to the sizes of the closets. Closet space can make a difference in how much profit you can make with your flip. Will you be able to increase the closet sizes by moving walls?
Do the Mechanical Systems Work?
The mechanical systems in a home are the electrical wiring, plumbing and HVAC systems. Make sure these systems work properly so you won't have to replace them. If the house has a septic system, hire a service to inspect the septic tank and the drainage field. If the house has a propane tank, be sure to have that inspected as well.
How Can You Improve the Curbside Appeal?
The way the house looks from the outside can increase interest from buyers or make them keep on driving. What can you do to the exterior to gain interest? Can the exterior of the house be improved with new vinyl siding and a new main entrance door? Try to visualize the house in a different color and with professional landscaping.
How Is the Local Real Estate Market?
Before you make a final decision, factor in all the costs that are involved and come up with a price point that you would like to sell the house for when it's ready. Use this price point to compare what other comparable houses are selling for in the same real estate market. Note: look at the recent sales and the prices paid, not at the current listings that are up for sale. This should give you a good idea of what kind of profit you may see when you sell the house.
If this is your first fixer-upper project, you may be pleasantly surprised at the end results… as long as you choose the right property to flip instead of a money pit flop. Continue here for additional reading.