A fixer upper house can be a great investment; however there are some pitfalls that need to be considered before purchasing any real estate investment property. One of the most important “Pro’s” of buying a fixer upper is the potential profit potential. A fixer upper house will always sell for more than it was purchased for, making this type of investment both lucrative and profitable. Another “Pro’s” of owning real estate include the low down payment requirements and loan terms. Fixer uppers have few down payments and loan terms that are favorable to the buyer; however these two “Pro’s” also come with their own set of “Con’s”.
There are many disadvantages to purchasing real estate investment properties; however the “Con’s” of buying real estate investment properties outweigh the “Pro’s” greatly. One disadvantage to purchasing real estate investment properties is the price. Fixer uppers are typically overpriced due to the demand for them; this type of over pricing is due to the fact that there are not many other homes available to the market to drive the fixer uppers prices up. If you purchase fixer uppers at the correct asking price, then hopefully you will make a substantial profit from them.
One other disadvantage to fixer uppers is that they are known to require extensive work. In most instances, professional services will be required to fix the property. Typically hiring a contractor to take care of the work will add an additional expense to the purchase agreement. The reason for this is because professional services will require the purchase of materials such as wood, paint, siding, carpeting, and fixtures. Additionally the work may need to be performed in areas where you do not wish to disturb or cause an inconvenience to your neighbors.
Another disadvantage to fixer uppers is that they do not usually sell for a great deal. In some cases the property may need to be repaired or completely remodeled before it can be sold. This is especially true if the fixer upper was purchased through a traditional sale.
In today’s market, we are all seeking to save money wherever possible. One of the easiest ways to do this is by investing in residential properties. The greatest advantage to owning residential properties is the low cost of ownership. This is because unlike fixer uppers which are owned by a single individual or family, residential properties are owned by multiple people. This allows for a lower price per unit due to the economies of scale.
However, a major disadvantage to this type of investment is that the profit potential is greatly reduced. Because these properties are not frequently updated, the property value decreases. Additionally, these properties are known to take longer to sell. This & con of buying a fixer upper includes the possibility of purchasing an under-performing property which results in a loss for the investor.
The third pro & con of fixer uppers is that they usually require a significant amount of financing. The major exception to this is with real estate owned property. Real estate owned properties are generally sold without any type of down payment. With this type of property, the buyer must pay for the property upfront. Other properties such as fixer uppers require a down payment prior to purchase. This should not be confused with a mortgage loan.
The final pro & con of buying a fixer upper is that they generally require a large time commitment. While this type of property does not require extensive remodeling or construction, there are a few things that buyers should consider before purchasing a property. While these properties do not require a lot of work, they do require the effort of finding and negotiating with potential home owners. It is also important to remember that there is a significant cost associated with fixing a home. These homes also will not be easy to sell in most cases.