Determining Whether a Fixer Upper Home is a Sound Investment

by : Clay Davis

There are many factors you need to consider when deciding whether you have found a fixer upper home worthy of buying. From location to the purchase price, the list of considerations may seem overwhelming before concluding you have a profitable home on your hands.

The first area of focus is the home's location. It doesn't matter what type of property you are investing in, if the location isn't right then you are simply not going to make any significant money on it.

Evaluate the neighborhood, where the house is situated on the street, and its proximity to appealing schools or large businesses. Many people initially filter home options based strictly on its location, and if yours isn't situated in a popular area, you will have difficulty selling that home.

When you find the house you want to fix up, determine exactly what you plan to do with it. Evaluate whether the house is actually a fixer upper at all.

For example, you may prefer to keep it to rent for a monthly income, or you may decide that you are going to "flip it," which means reselling it immediately after all the renovation. Each has its benefits. Flipping gives you an immediate return on your investment, while renting will provide you a profit over a longer period of time.

Check all homes within your budget, and take a leisurely drive around the city looking for those that may not be advertised in the local newspaper. By talking with friends and networking a bit, you may also be able to locate fixer uppers that aren't even yet on the market for sale.

When you do find the home you think you may like to purchase, you will do yourself a huge favor by taking the time and small expenses to have the house professionally inspected. The inspector should check every nook and cranny of the house to let you know exactly what you need to do to fix it up for resale.

Many problems with a home may go completely unnoticed by a novice investor, but a certified inspector can provide a much more accurate idea of what you will actually have to spend. Along with the inspection, you need a reputable contractor to estimate the projected costs of the repairs. It is important to seek several estimates to determine an average cost and, of course, to help you save money.

Two of the other most important aspects of knowing whether a home should be a "contender" are the purchase price and the projection of a realistic reselling price. Most fixer uppers are available in a distressed condition, making them more affordable than newer, contemporary homes.

It is not at all unusual buy a fixer upper for at least 20% below market value. That is your profit potential! However you have to ensure you can sell it for a great price once the renovations are completed. Definitely do your best to negotiate a great price when you buy it so that when you do resell, you can do so at a desirable profit.