Making an investment in real estate is not something you can just jump into. Whether you are looking to rent, buy a new home or put time into a fixer-upper, you are going to need to be well-informed before you make any decisions. Real estate agent Patricia Romano (RE/MAX) has some helpful tips for those possible homeowners looking to invest in a fixer-upper.
The first question you need to ask yourself is, is it worth even considering a fixer-upper?
While these types of homes can be found anywhere, even in wealthier neighborhoods, they have a much lower market value than other neighborhood houses. Before you make your investment, you should scope out the least desirable house in the best neighborhood. Now you have to do your math to see how much it would cost to bring up the value of that property to its fullest potential.
Is a tax break available for houses considered historical?
Certified historic structures can receive a 20 percent investment tax credit for qualified rehabilitation expenses. However, this does not include deductions for the demolition of major altercations of the structure. You must submit plans and specifications for the proposed work to architectural review and cost estimation, before a decision can be made.
Can you get a special loan for a fixer-upper?
In order to obtain a loan you need to look at the U.S. Department of Housing and Urban Development’s Section 203(K) to check if your home is eligible. Investors will need to put 15 percent down and owners will only need to contribute 3 to 5 percent. Your loan will also require a minimum of $5,000 being spent on improvements.
How do you find a good contractor?
Check with your state’s licensing board for contractors if available before you settle on one. Interview your contractor candidates and check into their worker’s compensation insurance and references. A good contractor will have no problem providing as many references as you need. Don’t feel rushed to make a final decision and don’t feel pressured to make a deposit on the first meeting.
How do you find a fixer-upper and is it worth your time and money?
These types of houses can be found in many communities, no matter the economic status. As a poorly maintained home they will generally have a lower market value. Taking on the task of remodeling a home will improve its livability for you and will also give some “curb appeal” for a potential buyer down the road. The best thing you can do for a potential payback is to update the kitchen and baths, home-office additions and other amenities in older homes.
A fixer-upper can be a great investment if executed correctly. Take these tips from Patricia Romano (RE/MAX) and make an informed decision on your next purchase.