Rehabs

The oft heard phrase "Buyer Beware" is never more appropriate than when considering the purchase of a fixer-upper.You really need to know exactly what you’re getting into before buying.

It’s commonly believed that fixer-upper properties represent easy money that is ripe for the taking - that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit.  Usually, this simply isn't the case. Although, with proper planning and foresight, good profits can be made by buying "distressed" properties at less than market value, making appropriate improvements and repairs, and then reselling.  And for many experienced buyers who know the pitfalls of renovations and have an effective, talented pool of contractors, buying a fixer-upper can be the very best option. I have several clients that only purchase boarded up buildings, renovate them and then resell.

The most important thing to know before making a decision on such a purchase is what needs to be fixed. Any time you are spending money on improving a property with the notion of increasing income potential and then selling it later, strive to spend your money on things that renters and buyers can easily see. Things like new paint and removing trash from the property cost little but have instant impact on curb appeal. Properties that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. Cosmetic repairs may allow for rent increases and any additional income generated by the property will increase your future sales price. Fixing and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives gives a good return on investment. Kitchen and bathroom remodeling usually pays a nice return. Don’t be afraid of buying a fixer-upper in need of this kind of repair. Properties with structural damage, or a floor plan that requires major work to remedy, will need to be purchased at a low price to allow for a greater rehab budget.

Always have an inspection for hidden damage performed by a construction professional before buying a rehab property. Make sure that satisfactory completion of such inspections are a condition of purchase in any contract you sign.  These types of properties are typically sold "as-is" and sellers will not pay for the cost of needed repairs uncovered by the inspection.  The purpose of the inspection is to give the buyer an better frame of damage to the property and the estimated cost of renovations.

Be careful that you don’t over pay. Especially if you plan to resell quickly, paying too much up front can doom your plans for quick profit. Research the market for reselling and have an exit plan for selling the property in place before making an offer.

One important note, if you are purchasing a property in a historical district, you will have restrictions on the types of exterior repairs that you can make. Also, you may be limited in the types of materials used or the manner in which repairs are made. In most cases, a Certificate of Appropriateness must be approved the Historical Preservation Board PRIOR to beginning any work.