You were driving on your way out of town the other morning, just minding your own business, when you spotted a home on a corner lot. The price was quite low and the grass was quite green… and you found yourself thinking, “What luck! I have to snag this home up quickly. I could double my money in no time!”
Not so fast.
Although some homes really are just as they appear – most are not. Some are hiding faulty electric work. Some are covering up termite issues and other are hoping to God you don’t stop by when the neighbors are having one of their weekend parties that typically end in blue lights.
Yes. There are many things to consider before you shell out your paycheck. Use these 7 key guidelines to stay on the straight and narrow to turning out a profit…
1. Snag the smallest home on the market in the best neighborhood in town.
Though a beautiful home will always get plenty of nibbles… if you list that beautiful home alongside its terrible neighborhood address, you will get an equal amount of potential buyers wiggling off the hook as fast as possible. This is because, for most buyers, the neighborhood is even more important than the home itself.
Our modern world makes it easy for families to know exactly what goes on in a neighborhood long before they move into it. From crime rates to school test scores, even budget buyers can afford to be picky… and because of this, investors must really put a lot of thought into the neighborhoods they invest in.
A way to stay in the game while not breaking the bank is to buy the smallest home on the market in the best neighborhood in town. There will always be a buyer for a great neighborhood with great schools. While you may pay more upfront, you will also sell the home quicker and make a better profit in the long run.
2. Don’t worry about curb appeal.
An ugly front yard can be a real deal breaker for buyers, but for investors, it can be a home run hit. While a buyer may not see past the strange-colored brick fencing or the bare, patchy grass, an investor can spend as little as $200 to create a front yard that not only sells, but sells quickly.
Your landscaping work does not need to look professional. It only needs to look nice and you can achieve this even on a small budget. For instance, mulch is fairly inexpensive and can make a big impact on the overall appeal of the property. Likewise, you can choose from plants that are on sale and, instead of hiring a landscape team, you can do the hard work yourself. Sure – it will take some time away from your weekend fun, but you will also save thousands of dollars on a landscaper.
3. Study up.
Before you make a bid, you will want to know exactly what you are getting yourself into. Know what other homes in the area sell for both fixed up and still in need of repair. The MLS is your friend. Use it to compare similar homes in both size and style. Always try to compare homes within .5 miles of each other when possible.
4. Don’t doom yourself with a “unique” home.
Unique in real estate speak translates to “weird” or “ugly.” While you can absolutely take one of these homes on and make them outstanding, in most cases, you will create a lot of unnecessary work for yourself. Even then, you may be unable to move the home.
It can be easy to get sentimentally attached to a home because it looks like one from your childhood, reminds you of your Aunt Darlene’s bungalow or because you always wanted one like it (although it is entirely wrong for your family and lifestyle.) Think of these homes like the gifts you buy for others that you only buy because you like the gift yourself. That is exactly what a “unique” home usually is for an investor. When you stick to easy-to-move traditional homes, you will make more money and garner more interest in the property.
5. Do not pay retail.
Paying retail may be fine for those buying to own a home, but it serves no purpose for investors. Flipping a home will return a better profit and keep you from feeling trapped in the deal when it takes longer to sell. Part of avoiding retail value is doing good homework on the area that you are buying in. You should also take a long look at similar homes and take good inventory of any work that the home needs. Online calculators can help you to get a ballpark idea of what each repair might cost you out of pocket.
6. Check out the surrounding area.
While a home in and of itself may be a great buy, the surrounding area could be trouble. This is especially true for buyers who snag low cost homes sight unseen. You never know exactly what you are getting into and doing your research can help you to make wise choices. From hoarding neighbors to crime stats and everything in between, knowing everything that you can about the home can be the difference in selling the home and wondering what the heck you got yourself into.
7. Stay away from homes on busy roads.
Likewise, parents are terrified of living next to a busy road because they worry terribly that their child or pets could be harmed. These homes near busy roads will almost always cut your chances of selling a property in half. This is because you are alienating buyers with young children and curious pets. Steering clear of these properties can greatly increase your chances of selling your investment property.
Real estate investing can be incredibly profitable when you stick to these 7 key guidelines. Although you will need to work hard, when you invest your time, money and heart beforehand, you will always come out on top.