Fix and Flip is one of the best ways to make good profit, if you can keep renovation costs down. Here are some renovation jobs that you should just avoid.
Becoming a successful property investor takes a great deal of skill, know-how and some courage. Despite the fact that all your calculations probably make sense on paper, there are still some outlying exceptions that could very well bring that house of cards tumbling down (pardon the pun). This is especially true if you are relying on the ‘fixer-upper’ model of business.
Yes, buying a home that is run down just so you can fix it up and sell is a wonderful strategy. For the most part, you could end up with a piece of property that has over 10% more equity value once it is all finished. That is if it all works out. But what if it doesn’t? How can you tell that a rundown property isn’t worth the time, effort and money? Here are renovation job red flags:
Electrical wiring is a mess
With any run down building, there are some basic facilities and amenities that will be at the very least, almost up to par. Things like electrical wirings will have a basic layout that might simply require some upgrading or ‘bring up to code’. For the most part, this will take an electrician a few days to look things over and make the necessary adjustments as per your requirement.
But when you find that the wiring in your new home is so far gone that it will have to be done afresh, then you might want to reconsider the purchase. Electrical work is not only expensive, it is dangerous, takes too much time and has too much red tape. It will cost too much money; money that you might not recover.
The roof has no integrity
Yet another part of the home that can completely ruin your budget: buying a house that needs an entirely new roof can be expensive. That, however, doesn’t mean that you shouldn’t buy one just because the roof is not as solid as you would like it to be.
The best course of action here is to get a rough estimate from a reliable builder who can tell you how much the roof repairs are going to cost and what kind of extensive damage has already been done to the house as a result of the roof being in that dilapidated state. Once you have these figures at hand, you can make an educated guess whether or not the whole venture will be worthwhile.
When the neighbourhood isn’t worth the money spent
Let’s face it, the whole point of doing all this is so that you can make money once it is all done. If, for some reason, you realise that the ideal final price tag on the house will be much more than the neighbourhood can support (similar houses are going for much less) and there are no indications that the conditions will soon change, then maybe you should let that deal go.
It is all about taking calculated risks. For the most part, these repairs and renovations will be run on store credit or as part of your mortgage, unless they are scheduled to pay off in a big way sooner rather than later, think twice about taking them on.