Today many buyers are looking for "that perfect deal". We've seen deals in various price ranges.
Investors have gotten back in the market. Some are looking for houses to use as rentals, while others are flipping properties for profit.
Many investors are looking to buy properties that need work, so they can build sweat equity. Some will buy a house that needs a new roof, or a new A/C, one that needs flooring or a new kitchen, perhaps a coat of paint or new bathrooms. Each investor may be looking for something a bit different. However, they are all looking for a great deal.
Investors are in the business to make money, today or sometime in the future. They know they make their money when they buy. Some are pros that can rehab a house in under a month. If they can get in and out and do the work affordably enough they are able to build some serious sweat equity.
On the other hand, there are novices looking for their first property.
In buying a property for investment, it's important to buy one with the right things wrong with it. Investors that aren't very handy, that have to hire everything out, should talk to a professional that knows the ins and outs of the business, first. They have to be careful they don't buy a house that burns a hole in their pocketbook. It will be the first and the last house they ever buy.
In buying an investment property there are many considerations:
Will you be doing the work yourself?
How long will it take to complete the job?
How much will it cost in materials?
Will you be paying yourself to do the work? Or could you be working somewhere else and making more money?
Consider what your closing costs will be to purchase the house.
How much will holding costs be? If it takes 9 months to do the job, how much does that amount to in mortgage payments? What about monthly water bills, electric bills, gas bills? And, homeowners association fees?
If the house is going to be resold, how much will the closing costs be to sell? How long will the property be on the market before it sells? Add that and the monthly utility bills to the holding costs.
Consider this, if it takes 9 months to do the work and the plan is to use the property as a rental, why not just buy a house with a tenant already in place? You'll be collecting rent from day one. And, the tenant will be paying the mortgage. Be sure the house being considered has positive cash flow. If the tenant is in place, you won't be putting money in immediately for fix up, either.
Or how about this...why not pay $10,000 to $15,000 more for a house, provided the numbers work, and buy a nicer property, one that doesn't need a major overhaul, but perhaps just some elbow grease and a coat of paint? Get the work finished in a couple of weeks, and get a tenant in it right away. Check the numbers first. For some people it pays to save the headache of trying to do the work themselves. They'll save in fix up expenses and many extra months of holding costs.
When I got into investing 14 years ago, my broker told me when considering a property to figure the numbers on paper first. If the numbers don't work, don't bother looking at the property.
We hear about sweat equity and it adding to the value of a property. But, in some situations, for new investors or those that aren't so handy, it may make more sense to think smarter, instead of working harder.
Sandy Shores REALTOR®, Melbourne/Palm Bay FL Real Estate
Brevard County Real Estate and Investing
I specialize in Residential, Investment & Relocations.
We have a team of professionals to facilitate your Short Sale.
I buy, sell, rent, own and manage Investment Property.
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