Real Estate Investing Guide: Why Should I Buy a House That Needs Renos
If you’re new to the world of real estate investing, you’re probably wondering why so many investors choose to purchase rundown properties that are nowhere near being ready to sell. While renovated state-of-the-art properties might look more attractive, the rundown houses that need renos are the real gold mines for real estate investors. Here’s why!
The Benefits of Choosing a Property that Needs Renos
While buying a property that needs renos is not the only option on your table, it could be the most profitable one. That is, of course, if you’re up for the challenge of doing the reno and managing a team of contractors on site.
If the house is out-dated, by doing a renovation to update the property, it allows you to create ‘forced appreciation’. This means you are increasing the value of the home for resale. As well, if you plan to rent the property, the more updated the space, the easier it will be to attract high-quality tenants.
A home renovation not only brings value financially, but there is an indescribable feeling that comes with an accomplishment of renovating a house & creating a beautiful landscape for new beginnings.
What to Consider Before Buying a Property to Renovate
While rundown properties usually can be purchased at a lower price, a good price does not mean you should dive into it right away. There should be certain standards on the line even when purchasing properties that need renos. Here’s what to look for when investing in rundown properties in any market:
#1 Check Vacancy Rates
Before you seriously consider purchasing a property, make sure to check whether it was empty for longer periods of time. If so, chances are it could be in worse condition than it looks like. Even if you’re planning to do a full-on renovation, there are certain things that should make you drag the line. For instance, serious issues with the foundation of the property or the plumbing system is reason enough for you to look elsewhere.
#2 Inspect the Property Thoroughly
It is surprising how easy it is to hide problematic features in a property and give it a false sense of quality with a couple of simple and cheap upgrades. You should beware of such quick fixes because they can cause a lot of headaches in the long run. Imagine starting a renovation project without even knowing what you got yourself into. Not a good position to be in. Thus, make sure to look past the surface and pay attention to possible issues with electrical wires, the roof, or the HVAC system.
#3 Look Into the Bones of the Property
The roof of the property, the windows, and the HVAC system are considered some of the most important foundational features. These are also the most expensive sections to renovate so keep that in mind when inspecting the property. If there are significant issues with any of these features, it might be better to look at other properties in the area.
#4 Check the Basement
While going down to the basement of a rundown property might not be something you look forward to, you just gotta do it. The basement of the property could be hiding significant issues that you should be aware of before closing the deal. This could be a water issue or a problem with the drainage system. Either way, you need to have the basement checked out.
#5 Consider the ROI
The main point of renovating a property is to be able to flip it for more money or increase the monthly rent if you choose to lease the place out. Thus, it is important to consider your return on investment before actually completing the transaction. Make sure the numbers add up and that the renovation process won’t cost you more than what you should be making.