Tag Archive | "work"

Fixer-Upper or Money Pit?

The “fixer-upper” is a grand tradition of real estate.

Many houses go on the market needing some work before they are truly habitable. Whether your intention is to live in the house or to fix it up and sell it on for a profit, you will need to do some work one way or the other – and because of the work involved, often these houses are available for a bargain price.

However, it should be noted that not every house that is available for a low price is a bargain. Sometimes, people only find this out after doing a lot of work.

A “money pit” is a house which looks like a bargain when you initially buy it, but when you come to realize the extent of the renovations that need to be done before it is even habitable you realize that you will have to spend a ludicrous amount of money.

If you are selling, you may not make a profit. If you plan to live there, you’d have been better moving in to an already suitable house and paying the extra money up front.

Of course, by the time you have found this out, it’s already a little late.

Before buying a house which requires work, it is always advisable to have a survey carried out on the property to find the extent of work that needs to be done.

You may be pleasantly surprised, or you may get a warning that you should not proceed with the purchase.

Although it costs money to have a survey done, it is still immensely preferable to buying rashly and then spending time and money putting that decision to rights.

“Buyer Beware”!

There is a Latin phrase – caveat emptor – which essentially, in English, means “buyer beware”. The message intended in those two words is that anyone purchasing the item so labelled needs to be careful.

The price may look like a steal, but ask yourself before you go any further”, who is doing the stealing, and who is being stolen from? You may well find that if a deal looks too good to be true, the reason for that may be that it is far too good to be true.

What you need to be sure of before you sign off on any deal is that the money you have budgeted for the purchase, in addition to the money you have earmarked for any changes to the house, will be recoupable from the sale of the house.

If you buy a house and then get inside the property to get a close look, the last thing you want is to see that there are problems which will cost a lot more to repair than you thought they might.

Suddenly, your big profit is looking like a small profit, a break-even deal, or even a loss.

Before you buy a house as a “fixer-upper”, think about what needs fixed and do not just look on the surface.

You may need to have a survey carried out on the property to make sure that it is not carrying other faults that could end up doubling what you have to pay to get the house up to scratch for the purposes of selling it.

Posted in Buying PropertyComments (0)

Renovation Ins and Outs

renovations
When you buy a house for the purposes of renovating it, there may well be a simple equation in your head. Money spent on buying house + money spent renovating = total spend. Resale price – total spend = profit. Simple! Isn’t it?

Well, maybe not. You see, on top of this you do need to consider what else is going on while you are renovating. Renovating a house is not something you can do in “dead time”, so you also have to look at how you live in the mean time. After all, if you need to be present for the work – because you are helping to do it or because you need to monitor the project – then this cuts into time that you would ordinarily spend working and making money.

If you have sold your house to buy the new one, then you will also need to take care of resettlement costs, whether you are renting or have found another solution. It is hard to live in a house which is in the middle of renovations, as anyone who has done it will tell you. You may need to work into your budget an amount which will cover the costs of your time spent on site and your temporary accommodation.

If you borrowed in order to buy the house, you will need to at least service the mortgage on it, too. Therefore it is essential that you have a plan, and that that plan is realistic. Many people get carried away thinking of the profit that they will make, but it is important to think about the difference between gross and net profit.

It is important when renovating a house to bear in mind that there is a big difference between a loose plan and a final plans. You may have ideas about what the house is going to look like and how much money it is going to make you, but those ideas can only become reality with a lot of work. Don’t get carried away by the seemingly foolproof nature of your plans.

You should always make sure that you “comparison shop” every decision you make. You may need to pay builders and other workmen to do the renovation work. You should consult as many different companies as you can before contracting one to do the work – check them for references and price. Do the same for materials and for any other service that will be required.

It can be tempting to walk away from a development, even temporarily, because you have just reached a point where every decision is difficult and you are second-guessing yourself on everything. You may just want to give up. At these times, you need to show steely reserve and keep in mind that time is very nearly equal to money.

Finally, you should always be ready to take the opinions of others on board. By going with your own gut on every decision you make it is possible to develop tunnel vision. You don’t have to run every decision by someone and agree with all of their points, but it can be useful to ensure that you are looking at the plan from a more detached angle – as this is what potential purchasers will be doing.

Posted in Featured Articles, Renovating PropertyComments (0)

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