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.
While the Chicagoland market remains steady- there is currently a 12 month inventory of available properties on the market. Generally anytime there is over 6 months of available inventory on the market, it is considered a Buyer's Market.
Its 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.
The downturn in the current market makes predicting the future price (potential resale price) of a "flipped" property more difficult to determine. For the conservative investor this market is an ideal time to "buy and hold" with plans to sell when the market is more robust.
Investing in real estate is similar to investing in a stock; you want to buy it when it is low, and sell it when it is high. There are definitely lots of deals in the marketplace in great areas.
When you are considering flipping a property, 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 home with the notion of selling it later, strive to spend your money on things that buyers can easily see. Things like new paint and removing trash from the property cost little but have instant impact on curb appeal.
Houses that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. This is especially true for the investor looking to hold the house (by renting) for a while before reselling. Fixing and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives gives a good return on investment, particularly when you can do the work yourself. Kitchen and bathroom remodeling usually pays a nice return. Properties with foundation issues, or a floor plan that requires major work to remedy, usually cant be "fixed up" at a profit.
Be careful that you dont over pay. Especially if you plan to resell quickly, paying too much up front can doom your plans for quick profit. Research the area for market rents and for reselling. You must have an exit plan for selling the house in place before making an offer.
We are very experienced in dealing with foreclosures and short sale properties. Call or email us today if you would like to find out more, or are interested in pursuing these types of properties for a buy and hold investment, or a flip.
Published by Pickard Group