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Is Your Fixer Upper Investment Really Profitable?

Investing in a fixer-upper seems like a quick way to make a profit. You buy a house for a quarter of the cost it would be, you sink in a few funds to make it livable, and then put it back on the market and find the perfect buyer – simple as, right? In reality, buying a fixer-upper to flip and sell on is more complicated.

Indeed, there’s a chance your whole budget could be blown in just a couple of weeks. But to prevent such an outcome from occurring, we’ve got some tips below to keep in mind throughout your flipping journey. Real estate can be a great investment, but only when you know what you’re doing.

Your Risk of Extra Work is High

One of the main risks you’re playing with here is the chance that your fixer-upper investment needs a lot more work than you were initially told about. You might rip up the floor and find that the foundation has sunk, or a cursory inspection of the attic might leave you with 3 or 4 holes in the roof. In these cases, you’ll have to do some major work to restore the house.

To counteract against such jobs becoming too much to take on, it’s best to focus solely on this property for the time being, especially if you’re a first-timer. Give yourself a bigger window to work in and you’ll come out the other side relatively unscathed.

Keep an Eye on Your Budget

calculator on money

The next big worry on your plate is your current budget. You may only have enough capital to cover the basic level of damage and renovations, but there’s a very strong chance you’re going to need at least a quarter more of this fund in the long term. Indeed, companies like Candea Development note that a lack of budget is the number one thing holding back investors like you, so this is a high priority issue to remain aware of.

As a general rule, basic home maintenance for a property that doesn’t need extensive work can cost upwards of $6000 per year. On the other hand, if you’re trying to put a fixer-upper back into a livable state, you’re going to need at least 3 times as much and can need upwards of 5 or 6 times as much.

Always Be Aware of How the Market is Moving

stock market screen

If you want to renovate a fixer-upper to sell quickly, you need to remain aware of how the market around you is moving. What do people in the local area want from a home? What would someone moving from elsewhere expect from a property in this area? Keep the needs and wants of local buyers in mind during the renovation stage and you’re far more likely to make the double return you always planned on.

Your fixer-upper project could make you a lot of money, but only if you plan for the worst-case scenario.

Conclusion

Considering one-up your apartment, business or vicinity would take a lot of time and effort. But most importantly it would take money out of your pockets while running the risk of not getting anything back. In today’s market, these investments will add value to a construction. But whether this will persist in the long term is auestionable.

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