June 20th, 2011 9:07 AM by Eileen Denhard
A home that needs major renovation can offer a lot of personal satisfaction and return on investment but it can also be a lot of work. Realtor® Rowan Samuel of Naples, Florida shares his experience of owning investment properties and shares five things that those thinking of buying a fixer-upper need to consider:
When we lived in Philadelphia years ago, we had several investment properties that we rented out. Most were “fixer uppers” that we picked up – the lowest priced house in the best neighborhoods. I was always going to Home Depot for something or another – they eventually knew me by first name I was there so often.
Realistically, the majority of fixer-uppers are in complete disrepair, meaning that it will cost you more to “fix it up” than to purchase a home in move-in condition.
However, if you are serious about buying a sound fixer-upper, here are a few tips on finding a sound fixer-upper:
1) Look in neighborhoods with resale potential2) Try to find a home that has been listed for sale for several months3) Always estimate your fix up costs before buying4) Avoid homes requiring structural improvements5) Avoid major additions, such as adding a family room or bedroom
The industry standard rule of thumb is to buy a fixer-upper for at least 20 to 30 percent below its “fixed-up” market value. It’s important to avoid both under-improving and over-improving a fixer-upper; in either situation you will not realize a good return on your investment.