Every year in the USA, there are millions of existing homes that are bought and sold. These homes come in all shapes and sizes, as well as in various conditions. While some people want a move-in ready home, others might want a fixer upper.
When many people buy a fixer upper home, they are doing it so they can quickly fix and flip the home. Fixing and flipping a home is buying it for a cheap price, fixing it up quickly and relatively affordably, and then selling it for a profit.
However, fixing and flipping isn’t the only use for a fixer upper. The costs can add up, a lot of work is involved and the time it can take to sell the home can be plentiful. With that in mind, this article is going to look at a few other ways to put your fixer upper to good use.
As an Airbnb
When people used to visit or stay in a new city, they would almost always stay in a hotel. However, in recent years, that has begun to change. A big reason for this is Airbnb. Airbnb allows anyone to rent out their home by night, similar to how a hotel will rent out a room. This often gives customers more bang for their buck, and allows homeowners to make money without doing a thing.
Sure, you will have to keep the place clean, stock it with items and perform a bit of customer service, but that is a small price to pay for what you can make. You will need to fix up your fixer upper to a point where it is livable, but renting it out nightly through Airbnb is significantly less work than completely renovating it and selling it.
As a Vacation Rental
While this will depend largely on where you live, you could also rent your home out as a vacation rental. For example, millions of people travel to California every single year, and they need a place to stay. If your fixer upper home has a good location, it could be perfect as a vacation rental.
You could rent it out weekly or monthly to interested parties, and potentially make thousands of dollars. You will need to update it and ensure it functions well and looks nice, but think of this as an investment than a cost. Sure, selling a house from ISoldMyHouse.com can be a good idea and can net you a lot of money, but be sure to consider putting the home up as a vacation rental as well. This could allow you to make a good amount of money, without actually having to lose the asset.
As a Standard Rental Property
Another option instead of fixing up and selling your fixer upper is to fix it out and then rent it out. Being a landlord is indeed some work, but can be incredibly fruitful financially. Depending on the size, location and look of the home, it can be rented out to families, couples, university students or anyone.
Oftentimes, you will essentially be able to get your mortgage paid for if you rent out the home. In some cases, you may even be able to charge more in rent than your mortgage if you include utilities or internet. While you will essentially be breaking even for a little, once the mortgage is paid off, the rent you collect will be nothing but pure profit.
In conclusion, there are many different things you can use a fixer upper for, in addition to simply fixing and flipping it.
If you think that only affluent individuals invest in real estate, you cannot be farther from the truth. The prospects of potentially hefty earnings attract people of different financial statuses and all walks of life and the best part is – they are all welcome.
Anyone can join the real estate business since there are different ways to join the game and not just how you think big real estate companies operate. To help you find the most suitable method, here are a few simple ways to achieve success in the real estate arena.
Go with a rent-to-own agreement
Rent-to-own is an interesting manner of acquiring a property you like at a more convenient moment. You rent a place and sign an agreement that after a predetermined period of time you will purchase that property. As agreed, a percentage of those monthly installments become a down payment on a mortgage. This is especially suitable for those who need time to improve their credit score so they can use that predetermined period to do that. Other benefits include that you agree on the price at that point so any subsequent rise in the price of real estate properties will not affect your agreement, as well as having the opportunity to get to know the neighborhood and both bad and good sides of the house before you purchase it.
Purchase a vacation rental
Many people dream of owning a property on the seaside so they can rest there during the summer. And even more dream about renting the said vacation property and earning from it. The idea is simple: you purchase a property at a tourist-infected location and rent it. However, you might want a vacation rental at some luxurious destination but that can be costly. So, when choosing the location, you need to account for the potential income in the future and how you would advertise the place. For instance, you might choose a trusted online platform such as Airbnb. You can create a profile, post property pictures and communicate with tourists via this platform and you also need to take into account the service fee which is deducted each time a booking is completed.
Transform a charming fixer-upper and sell it
Perhaps the most traditional real estate investment is purchasing a property under market value, fixing it up and selling it at a higher price, and this process is called flipping houses. However, for somebody who hasn’t got much experience, it can be quite tricky to assess which of the properties is worth investing in since the cost of fixing it might surpass its value. In this case, you might want to consult with an experienced real estate consulting firm because they can help you to make the optimal choice based on customized reports as well as offer legal advice during the purchase procedure. This step by step service might also include performing a detailed property inspection and provide you with various interior design ideas so that your fixer-upper can reach a good price.
Consider real estate investment trusts
To invest in Real Estate Investment Trusts (REITs), you don’t need to purchase a property. REITs are companies that invest the majority of the money into real estate and their profit depends on it. You buy shares at a REIT which means you are not in charge of collecting rent or emergency repairs – you don’t need to have any contact with the tenants whatsoever. As a shareholder, you need to know that the income comes in the form of dividends. This type of investment offers more opportunity for portfolio diversification because any major repair of one of the properties you rent out can be detrimental to your budget. If you find this strategy interesting, you should look into thriving REITs and purchase shares with them.
Test your resourcefulness with wholesaling
This type of real estate investment doesn’t involve that you invest anything or purchase a property which makes it appealing to many. Wholesaling a house means that you are contracting a seller that has an undervalued house on the market and then quickly selling it at a higher price than they asked for it. Your profit comes from the difference in the prices. However, wholesaling demands a lot of patience and different skills because it is neither easy to find sellers who are eager to sell a distressed property nor is it easy to find an interested party quickly. Although it is not for everybody, the end profit can be quite lucrative.
And now that you know that there are many types of real estate investment, it is time to opt for one that suits you and sail on the tides of real estate success!
The fact that interest rates have dropped to near historic lows as the rents continue to sky rocket in most urban set ups, buying a home seems to tilt the balance to its favor. The reports by Trulia also suggest that for renting to become cheaper than buying, the 30-year fixed mortgage must hit at least 5% in Los Angeles and 5.1% in New York City. However, the mortgage rate has hit a low of 3.17%, making the projection unattainable, at least in the near future.
As much as the statistics favor home buying over renting, for many Americans, the financial tradeoff may not be easy. Numerous advantages come with home ownership, not to mention the tax deductibles on your mortgage interests. But if you don’t carefully analyze your financial situation and make informed choices, home ownership can turn into a financial nightmare.
The most critical component of your decision-making process should be your financial stability. You need to ask yourself key questions like: How stable is your job? How likely are can you get a pay raise or promotion over the coming years? Is your job likely to shift locations or cities? How stable is your marriage or relationship? Is there a possibility of splitting up or divorcing that may occasion untimely disposal of the home? And so on. If the answer to one or more of your questions indicates doubts on whether you will maintain the house within the next five years or more, then it would be pointless to commit yourself, regardless of the mathematics.
Change of Cities
If the nature of your job or appointment involves frequent relocation or change of cities, you may need to evaluate between buying and renting. Many home owners have suffered the cost of servicing mortgages for homes they do not live in. They even spend more resources in renting homes in their new location. Their efforts to sell may be thwarted when the timing coincides with the market lows when the mortgage interest rates rise, wiping out their equity and savings.
Many Americans are living under strenuous financial situation and may not be in a position to save enough for the down payment. You need to analyze your individual financial status. The ultra-tight real estate markets like San Francisco even make it harder for aspiring home owners.
Home Insurance Costs
It is important to know that homeownership doesn’t stop with the acquisition of the mortgage. You’ll need money to settle your property taxes, and the mortgage company will require a proof of home insurance policy. When you rent a house, your landlord will cater for property insurance in addition to some utility bills like water, heating, or power. However, you may need to provide for your rental insurance, which is much more affordable. The policy still provides good benefits of homeowners’ insurance, except that it doesn’t cover the building structure.
Home Maintenance Costs
As a homeowner, you take responsibility for all your maintenance costs like fixing a leaking roof, the parading ants over your kitchen cabinets, broken toilet bowls, electrical breakdowns, and much more. And then there’s the dirty task of mowing your lawn, cleaning the compound, painting the walls, etc. When you decide to rent, most of these tasks will be done by the landlord or an appointed agent.
While it’s true that reduced rates are quite tempting to potential home buyers, you shouldn’t use the statistics to make costly purchases that could turn problematic. You can consider renting affordable housing alternatives like studio apartments as you put aside substantial savings for future investments. That way you’ll be able to make much larger down payment when the markets can’t offer better mortgage rates.
If you borrow less and give a huge down payment, the banks and the property sellers will prefer you over your competitors in a bidding situation. Additionally, your house will appreciate much faster in value as interest rates reduce, cutting down your financing costs.