Whether you invest in a home for the profit potential that comes with renting or flipping it, or simply want to a place to live with your family, there are some common do’s and don’ts that you should keep in mind.
Do look at multiple homes before making a decision. Even if the first house you see is the one you think you want, look at a few more to be sure.
Do consider the potential in a home. Maybe the bathroom is a bit outdated, or the kitchen needs new appliances. A small investment in a bathroom or kitchen remodel cost may net more money in the future when you decide to sell, or in what you can charge for rent.
Do get a home inspection. Before you make an offer, or at least before you sign any paperwork, ensure that you’ve had a thorough home inspection so that you’re aware of any hidden problems that the seller may not have disclosed. You want to know exactly what you’re getting into before you put your name on the dotted line and commit.
Do buy what meets your needs, not your wants. Determine what you need, and create a list of both needs and wants. Consult your list when looking at homes, and if it doesn’t meet your needs, ignore any wants that it might check off. The pool you want won’t make up for the lack of a third bedroom that you need for your family. Also, if you’re purchasing to flip or rent, consider what’s most likely to sell or rent, rather than what you personally want.
Do remodel for potential profit. A kitchen remodel cost of about $4,000 will get you about an 85 percent return on investment. That’s enough to install new countertops, cabinets, flooring, and a range hood and sink. Sure you’ll eat 15 percent of the costs but whoever buys the property from you will pay for the rest. So you get to enjoy an updated kitchen knowing full well that you won’t pay for most of it. Your kitchen looks brand new and you’ll reap the benefits of that. It will also make the home easier to rent or sell, if you choose to do either in the future.
Don’t trust everything you read in a real estate ad. Agents and sellers are trying to sell you their properties. They’re not going to list the home’s problems. At least, not in plain English. Look for code words, such as “cozy” meaning small, “as-is” meaning there’s work to be done – possibly very expensive and severe work. A thorough inspection and a healthy dose of skepticism are your best friends here.
Don’t buy the most expensive house in the neighborhood. It might be beautiful, and it might be within your budget, but it may be hard to sell later. Can renters afford it? Even if you intend to live in the home, possibly for the rest of your life, you still need to consider the potential for selling down the road. Do you want your kids to be stuck with a behemoth of a home after you’re gone?
Don’t buy without seeing the property personally. You may trust your real estate agent implicitly, or perhaps your mom or brother or best friend told you about an awesome deal on a house, but you still need to look at it yourself.
Investing in a home, for personal use or for profit can be fun and exciting. Following these simple do’s and don’t suggestions can help you find the perfect home to suit your needs and keep you from making mistakes you’ll later regret.
by: Kevin Faber