When a buying a new property for renovation, there are a lot of things which you need to consider to determine if the state of the purchase is and how much it would cost you to renovate it. Underestimating the cost of the renovation + the cost of the property is one of the most common mistakes which can cause problems with the process.
The goal of this text is to clarify and showcase these mistakes so you can avoid them, thus saving yourself the hard lessons we’ve learned throughout the years.
Here’s what everyone has done at least once
These mistakes might seem like common sense because hindsight is 20/20, however, there is the moment of perspective and acting in the moment. Which is why the biggest advice we can give you is – Don’t act hastily, choose carefully.
Doing it alone
Whenever taking on a project, one might considering doing an entire renovation alone, and while some people have the time and energy to undertake that alone, DIY renovations are rarely that good of an idea. The sole reason is that it’s a lot of work and while you are trying to save money on labor costs, you are wasting time which you could use elsewhere – time is money after all.
Looking at the price and not the property
When looking for a good buy for a renovation, it’s very likely that you will be orienting yourself based on the price. While there are foreclosed locations around the US, there are a lot of factors which will determine the price of the property, like:
- Accessibility from the city + transportation;
- State of property;
- Distance from the center of the city;
- Price the bank bought it for.
And while there are some steals, a lot of the properties on the market either have a high mark-up due to real-estate inflation, or due to a thick commission from the estate agency which is selling the property. Don’t focus on the price alone, look at the value of the property in perspective and take a look at the state of the building and the perspective which it has once you are done with the renovation.
Forgetting about the foundation
Speaking about the state of the property, always make sure to take a good look at the foundation and roof. Get a consulting specialist like a structural engineer and have him inspect the property before you buy it.
If there is small foundation failure, it can be fixed relatively easily and cheaply, however, if there is foundation sinking, a renovation of the house will definitely cost a lot more than you’d expect. When the property is sinking, it’s coming out of square, a lot of the walls will not alight and it becomes quite a hassle to fix – dry wall will crack, joints will show and paint will fall once it’s aligned and the foundation is fixed.
Selling and not renting
If you decide to sell after renovation, you will be missing a lot of profit from renting. When selling, you will be working with the current market conditions, whereas if you rent, you have the ability to sell when the market is a lot higher and the prices are far more stable.
Renting still provides you with the income, and depending on the type of property, you can get the value of the house + the renovation costs within 5-10 years of renting. If the renovation is of high quality and the house has nice features, you can even ask for a higher rent.