The oft heard phrase
"Buyer Beware" is never more appropriate than when considering the purchase of a
fixer-upper. You really need to know exactly what you're getting
into before buying.
It's commonly believed that fixer-upper properties represent easy money that is ripe for
the taking - that you can buy it, do a little work on it in your spare time, and then
resell quickly for a large profit. Usually,
this simply isn't the case. Although, with
proper planning and foresight, good profits can be made by buying "distressed"
properties at less than market value, making appropriate improvements and repairs, and
then reselling. And for many first time
buyers who intend to live in the house while working on it, buying a fixer-upper can be
the very best option. It's less risky buying a
fixer-upper when you can live in the house while fixing it. And
of course, by living in the house for at least 24 months you should be able to avoid
paying regular income taxes on the profits.
The most important thing to know before
making a decision on such a purchase is what needs to be fixed. Any time you are spending money on improving a home
with the notion of selling it later, strive to spend your money on things that buyers can
easily see. Things like new paint and removing
trash from the property cost little but have instant impact on curb appeal. Houses that have only cosmetic problems like
peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. This is especially true for the first time buyer
looking to live in the house for a while before reselling. Fixing
and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives
gives a good return on investment, particularly when you can do the work yourself. Kitchen and bathroom remodeling usually pays a nice
return. Don't be afraid of buying a
fixer-upper in need of this kind of repair. Properties
with structural damage, or a floor plan that requires major work to remedy, usually can't
be "fixed up" at a profit.
Always have an inspection for hidden damage
performed by a home inspector or construction professional before buying a fixer-upper. Make sure that satisfactory completion of such
inspections are a condition of purchase in any contract you sign. Then be sure to negotiate to try and get the seller
to pay for all or part of the cost of needed repairs uncovered by the inspection. Often, sellers will be willing to lower the sales
price to sell the home "as is" instead of paying for the repairs.
Be careful that you don't over pay. Especially if you plan to resell quickly, paying
too much up front can doom your plans for quick profit. Research
the market for reselling and have an exit plan for selling the house in place before
making an offer.
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