Many people have had tremendous success in the real estate market purchasing distressed properties to renovate and resell; and perhaps you have considered taking on a similar project of your own. You probably have a lot of concerns and you may have asked yourself: How much DIY is too much? Or...How do I balance the cost of a contractor with doing the work myself? There are many factors that need to be considered when looking into purchasing a distressed property. Some of these include:
Time:
Time really is money when it comes to renovations and resales. As long as you own the property, there are going to be costs associated with it. The longer you hold on to that property, the more money you will spend. This is why it is important to assess the exact needs of the project. You must be sure it will not require more time than you can commit to. Some of your on-going expenses may include:
- Insurance
- Taxes
- Utilities
- Lawn maintenance
- Interest accrued on the loan
Licensed Work vs. DIY:
When choosing a project, it is important to look at what exactly needs to be done to the property to make it marketable again. Weigh out how much of the work must be done by a licensed contractor, compared to how much can be done by you. If the majority of the required work must be done by a licensed contractor, you may want to reconsider that particular project. Some of the areas you need to consider to avoid this pit-fall include:
- Electrical
- Plumbing
- Heating and Air
- Roofing
Purchase Price vs. Potential Market Value:
It is important when choosing a project to look at what the potential market value will be when the property is completed. One way that you can do this is by looking at what similar homes in the area have sold for. Deduct the purchase price from the potential re-sale price to determine the amount of money you have to work with. Then consider the following factors:
- How much work will need to be contracted, and what is the approximate cost of that work?
- Are the repairs major or minor, and am I physically able to perform a majority of the work myself?
- What is the total of my on-going expenses?
- Is there any asbestos that will require an expensive abatement process?
- Is there any mold, or is there any water damage that could potentially cause mold?
- Are there any pest issues that will require professional treatment such as termites, roaches, fleas, or vermin?
The process of purchasing and reselling homes can be an ideal overall investment, not only for you, but for your community as well. It contributes to neighborhood restoration and beautification and provides additional housing opportunities. If you have considered a real estate investment project, please contact us to find out how we may be able to assist you in obtaining the funds you need to put your plans into action.
