There is money to be made buying, renovating, and selling houses. More and more people are beginning to notice that. Now that the spreads between value of a distressed home and the value of a renovated home have widened investors are coming to real estate to turn a profit.
The value range has grown in price points where first time home buyers are the primary new owners of houses. Most first time buyers are using government backed loans such as FHA and VA. Therefore the homes have to meet the property standards set by those agencies in order for the Buyers to be able obtain financing for them. Distressed homes rarely meet this standard. Although there are some programs for repairs for the owner occupant Buyer such as 203K loans, many of the buyers in today's market prefer "turn key" houses.
Enter the investor who buys a home and totally renovates it. There is a difference between installing new carpet and painting the house and actually renovating a home. Fannie Mae has realized that installed new carpet and fresh paint makes their distressed homes sell quicker so they have begun to do that with some of their HomePath houses. The investor is looking for the houses that tend to be severely distressed. Usually at a minimum they will need a kitchen, new bathrooms, paint, carpet, and some exterior work. Some of the houses need new windows, siding, roofs, and more.
It is not uncommon to see house values for similar homes vary by over 40%-50% based on condition. Thus the investor can add 30% to the house and still make a profit of 10%-20% when it is all said and done. This is what it will continue to take to improve neighborhoods and communities that were hurt by distressed homes as we rebound in the housing market.
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