More and more people are trying to enter the real estate market as investors hoping to buy a “fixer upper”, renovate it, and put it back on the real estate market to make a considerable profit. There are several television shows dedicated to the subject of flipping a house, turning a quick profit. They make it look so easy. However, as many find out, there can be a lot more involved in making a profit in today’s real estate market than putting on a fresh coat of paint.
Although I am not one of those people who have decided to brave the real estate market and buy a house for turn around investment, the thought does appeal to me. I frequently watch those television shows, have had discussions with real estate agents, and have investigated a number of houses. With the rise in the prime interest rate comes an increase in mortgage payments for those with adjustable rate mortgages. This is resulting in a flood of foreclosures saturating the real estate market. This is, of course, bad news for the average American, but could be good news for investors with money to spend and good credit hoping to make a good return in the real estate market.
Investors with the right knowledge and resources to hire the right people to do the job should do well in finding property in today’s real estate market worth taking a chance on for that ultimate profit. For the less experienced, should they take advantage of today’s foreclosing real estate market, they should do the research and be prepared to work hard and have patience. They should have the available cash flow to float mortgage payments for as long as it takes to complete the project, plus any related unexpected renovation costs that may occur. Being unprepared financially and having to use credit to complete your real estate market investment will put a crunch in your profit margin.
The most important thing you should remember before you invest in any property in today’s real estate market is to never buy property without a full inspection. You do not want to settle for just a pest inspection. Spend the few extra hundred dollars for a complete inspection; it will be worth every penny. The only changes you want to be making are cosmetic, not major overhauls. When you may have budgeted $30,000 for the total renovation, having to replace electrical, plumbing, or structural damage can eat away your profit.
The preferable investment in the real estate market is a property that is structurally sound, in a growing location, and needs only cosmetic work. Updates that sell a house in today’s real estate market are kitchen improvements, bathroom updates and flooring replacement. Replacing kitchen cabinets can be very expensive, whereas cosmetic changes such as replacing cabinet hardware and flooring make a visible impact with little expenditure. Replacing old appliances with newer, modern ones will probably be necessary. This same idea can be applied for bathrooms; replacing bathroom fixtures is a small, but necessary, expense that will really increase your profit in the real estate market. Modernizing light fixtures, and possibly adding ceiling fans, can be a valuable and inexpensive idea. Flooring replacement will be one of the most expensive updates, but will add great value in your property. Hardwood flooring in living areas and bedrooms, and granite or travertine flooring in kitchen and bathroom areas can make a strong impact add value in today’s real estate market.
Have patience and obtain several contractor bids and know the reputation of the workers you hire. Plan on the actual renovation costs being 10% higher than your actual budgeted amount. Make your renovation plans wisely; do not lessen your profit margin by making unnecessary renovations. Consider the real estate market and plan your improvements accordingly. Do not overlook the outside of the property and the curb appeal. A clean fresh simple landscaped yard offers a great first impression to the home buyer in today’s real estate market. With a smart investment, pre-planning, and hard work, you should succeed in turning a profit in today’s real estate market.