The Difference between Investor Loans and Home Ownership
By: Kimberly Hoffman
Investor loans for “Fix it and flip it” is a phrase often associated with real estate investing. The idea behind the concept is that the completion of a few choice rehab projects will add significant value to the price of a home. With this in mind, many homeowners undertake major renovation projects before putting their homes up for sale with the idea that sprucing up the place will result in a higher return. More often than not, these upgrades fail to pay for themselves.
Using your investor loans for updating an investment property is generally a sound strategy because successful advocates of the fix-it-and-flip-it philosophy buy fixer-upper homes at bargain prices and save money on the repairs by doing most of the work themselves. A little sweat equity goes a long way toward making a real estate investment profitable.
Investors carefully choose their remodeling projects, focusing on those that will result in the most value for the least amount of effort and cost. Part of the process includes paying attention to the other homes in the neighborhood to avoid over-improving the property. If none of the other houses in the area have crown moldings and granite counter tops, adding these amenities is less likely to result in a significantly higher selling price.
Owners, on the other hand, often take a less strategic approach to remodeling when sprucing up their homes prior to putting them on the market. As a result, they can end up putting significantly more money into the project than they will get back out of it when they sell.
To make the most of your investor loans and projects, it pays to keep four types of projects in mind : basics, curb appeal, value added and personal preference.
The Basics to Consider When Applying For Investor Loans
The basic are the things that buyers expect when they purchase a home. This includes a roof that doesn’t leak, functioning gutters and downspouts, a dry basement, a good furnace, solid floors, walls that are in good repair, retaining walls that work and all of the other common-sense items that you expect to find in a home.
In upscale properties, this includes air conditioning, a certain number of bedrooms, bathrooms and garages, and any other amenities that are common to the neighborhood, such as a swimming pool.
Adding these items to a home that lacks them doesn’t add value, it merely brings the property up to the standard level of the rest of the homes in the area. Money spent on these items is unlikely to be fully recovered, but should at least result in ensuring that the home sells for a price that is comparable to other homes in the area and a good value for your investor loans.