Real estate has long been considered one of the best investments you can make. And, even after the housing market ups and downs in the last several years along with rising interest rates, real estate can still be one of the best ways for investors to make money.
Of course, some of the largest profit margins come in the form of "fixer-uppers." The key is to be able to identify a viable fixer-upper rather than a money pit. A fixer-upper needs to be profitable after the cost of the home and all of the repairs are deducted. This isn't always easy to determine in advance, but there are some things you can do to improve your odds of finding a literal diamond in the rough. Because of the number of people constantly moving to our area, along with the number of vacationers, the Myrtle Beach area offers a number of homes and condos for sale that make excellent real estate investments.
According to Home.com, here are five major things that you need to inspect before you make a deal.
A standard shingle roof only lasts about 15 to 20 years. With a roof replacement on a standard-sized ranch home costing as high as $8,400, this is a substantial expense if the property you purchase needs a new roof. In fact, barring any structural problems, a new roof is most likely going to be the most expensive project you’ll have to take on if you want to be able to flip your fixer-upper.
#2: Heating, Ventilation, and Air Conditioning
Next to the roof, replacing a home’s HVAC system is the single most expensive item you’ll have to deal with. Depending on the size of the system and the type of equipment you purchase, you could be easily looking at $8,000 to replace an HVAC system.
Most fixer-uppers are either going to need their systems replaced or overhauled to some degree to make them safe and up-to-code. In older homes with no previous heating and cooling systems, entirely new systems including duct-work will need to be installed if you have any hopes of being able to sell.
The foundation is what the home stands on, so it's essential for it to be checked, and checked thoroughly. If the foundation has cracks or looks like it is sinking, then you're looking at major repair investments. But not all foundation problems are found outside the home. Other signs include uneven floors, gaps around window frames or doors, doors that stick or won't close properly, and cracks in the basement walls.
#4: Electrical System
If you want to sell your fixer-upper of an investment property for a profit, then it needs to be able to handle the electrical demand of a modern family. Any old or outdated equipment will need to be replaced, and everything will need to be brought up to code. In many cases, the panel box will need to be updated and extra circuits added throughout the home to bring it up-to-date with today's technology needs.
If the investment property you're interested in has been sitting empty for some time, then there will no doubt be problems with its plumbing system. Plumbing pipes last longer when they’re being used, and when they aren't used for a lengthy amount of time, they can become dry, brittle, and more likely to develop leaks. In some cases, the only option is to tear open the walls and replace all the pipes and fixtures to ensure a safe, water-tight system.
Additional Concerns and Considerations
There are a lot of things that might be wrong with a home that can increase the financial commitment just to get it in shape for selling. Other things you should look for or consider when planning to invest include:
Insect or pest infestations, Property Location, Water Damage, Mold, Dry Rot, and Asbestos.
While it's every investor's goal to sell an investment property after fixing it up, there are instances where a home still won't sell. So, if you want to be a real estate investor, you need to have a plan B, in case your plan A, selling the property, doesn't work out.
You'll want to ensure that the home you invest in can still turn an eventual profit if you are forced to rent it out, instead of selling it quickly. Your profit will take longer to accrue this way, but at least you won't be sidelined with a second mortgage if you can get a renter in at the right price.
At BRG, we have several Agents who are also experienced Property Investors. These experts can guide you and help you make informed decisions as you step into the world of Real Estate Investor.
Call us for more information! 843.883.6600