Buying a Fixer Upper

Look at the price discrepancy between the house and comparable properties.

Renovating can be a great way to add value to a home if you buy it significantly below market value. The trick is to not spend more on your purchase price and renovating than the home is worth. A good way to determine how much that might be is to look at the price discrepancy between the home you want and comparable properties.

If similar properties are going for $50,000 more than your home, you conceivably have a $50,000 budget to work with before you exceed your home’s value. If you spend more than that, you risk pricing yourself out of the market if and when the time comes to sell.

Price out home improvement projects ahead of time.

Don’t just assume that $50,000, for example, is a lot to work with. Certain improvements cost significantly more than others. Don’t guess. Get a professional contractor’s opinion and budget the home improvements you’re considering. If possible, have several contractors visit the property  and provide bids based on the work you want done. A contractor may be able to spot potential problems before you start, and can give you a much more accurate idea of your cost than any estimate you’re able to make.

Get a thorough inspection by an experienced professional.

Even if something looks good on the surface, and you’ve got plenty of cash to make the improvements you need, you may still find yourself running into trouble once you begin your project. Get a thorough inspection by an experienced professional before you decide to buy and renovate.

Home Inspections can turn up vital facts, like faulty electrical systems, plumbing that needs to be replaced or even problems with the foundation or roof. These critical issues must be corrected first and foremost, and can eat up a substantial portion of your budget when buying a fixer-upper. Make sure you know what you’re getting into before you buy a home.

Then, make sure you know the correct way to pay for that property, and believe me, it isn’t the way the bank tells you to pay! You can recycle your equity into your home, or just change the timing on your mortgage and other bills. Thousands of people doing this are becoming debt-free, including huge credit card balances, in 5-12 years. How’s that for a good investment in a fixer-upper?

(Register for a free workshop on mortgage acceleration. You’ll be glad you did.

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