If you watch television, you have seen the shows that turn dumps into pristine dream homes. Fixer-uppers can return good profits, but be careful when calculating repair costs.
Choosing A Fixer Upper
Flip it! Ah, the American Dream to the road to riches. The goal is to find a decent to a nice neighborhood with a home that has a lot of “character.” The place is a dump and needs lots of work. Homebuyers can be suckers for these homes. They tend to see a low price when compared to the rest of the neighborhood and think they can make a killing when they fix the home up. This can happen, but you must be very deliberate with your decision.
Can you make a ton of money flipping fixer-uppers? Yes and no. If you can do the work yourself, the profit potential is much better. If you must hire contractors to do it, you need to take a moment and break out the calculator. Many people fail to do so and regret getting into a fixer-upper.
Rules For Fixer-Uppers
One of the places people make mistakes with fixer-uppers is failing to consider code requirements. The “code” refers to regulations requiring the use of certain materials and products in a home. Many older homes are not in compliance with code requirements, but often do not have to be as long as nothing is changed. If changes are made, however, the code can become a problem.
For instance, assume you make some change to heating or air conditioning in the home. In an older home, you may be forced to also update all of the electrical wirings. The same goes for plumbing where older pipes may need to be replaced with new ones to meet code. These can be expensive fixes and run your cost in upgrading the home through the roof. What was one a tremendous real estate deal quickly becomes a money pit.
Flipping a home that needs some cosmetic repairs can be very profitable. If you do not understand the full costs associated with the upgrade, however, it can become an emotional and financial nightmare.