People from all walks of life will wander into the world of real estate without the initial intention. The urge to invest in a property that you could call your home for life is hard to resist. Not only this, but more and more homebuyers are looking into what are known as “fixer-upper” projects. These projects are unique in the sense that they provide the buyer with the freedom and creativity to do what they want with the property.
Once they have fixed it up and restored it into a condition that neatly slots into the real estate market, the financial gain opportunities will begin to transpire. If you are to succeed in this type of property investment as a newbie or simply want to educate yourself more on the subject, there are a few things you ought to take note of.
Fixing Up a Home for Financial Gain
Well, why not, right? A lot of people are seeing an opportunity and grabbing it with both hands. By opportunity, we mean securing a low interest rate on a property with a fairly low net worth and capitalizing on that opportunity to restore, renovate, and reap the financial rewards. It is possible to make thousands, if not hundreds of thousands depending on the type of “fix-up”, of dollars by selling the property on when interest rates peak.
Selecting a Mortgage for a Fixer Upper Project
A project of this kind is not just like any other. There is some risk attached in the sense that you may struggle (which is highly unlikely in a market where millennials are house hunting in their millions), or that you may not rake in as much of a profit as you would have initially hoped.
Nonetheless, the prospect of having something fun to work on and more importantly, something that you are passionate about, is exciting to say the least. In the event that your funds are not exactly prime for investment purposes, there are a few things to consider mortgage-wise.
Here are the most popular financing options for property purchases of this kind:
– Standard 203(k) loan - Suitable for most types of home repair and improvement.
– Limited 203(k) mortgage – If your home repair project is limited to minor improvements, such as repairing gutter pipes, this type of mortgage will be best suited.
Things to Consider with Fix-Ups
Don’t let yourself fall into a financial pitfall unnecessarily. If you discuss your mortgage financing options with an expert, you can better understand if you would suit a loan that is flexible or one that has a fixed interest rate. Remember that the home improvements will be assessed by the lender to ensure everything is being dealt with fairly and professionally.
The method of “fixing and flipping” a home is one that property buyers have been gaining profit from for years. Doing it successfully requires proper financial planning. On that note, it may be worth considering your financing options to ensure your financial stability for the future.