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Is That Fixer-Upper Worth It?

Frisco Property Manager Renovating a Rental Property Kitchen

Obtaining a fixer-upper to apply as a Frisco rental property can certainly be an attractive option to a lot of investors. Certainly, it is generally true that the less you pay for a property upfront, the more likely it is to produce higher returns both month-to-month and once you sell. Although, it is also true that fixer-uppers come along with a host of plausible downsides, some of which can immediately turn that bargain property into a financial nightmare. Before you want to invest in a fixer-upper, it’s necessary to take into consideration whether buying one is worth it. After appraising both the potential risks and benefits, you can more effortlessly decide whether acquiring a fixer-upper to use as a rental property is the proper choice for you.

The Pros

One of the important arguments that rental property investors make to buy a fixer-upper property is instant equity. For the reason that fixer-uppers normally sell at a lower price than houses in better condition, they frequently increase in value very quickly with just a bit of repair and updates. A lower purchase price moreover generally equals to a lower mortgage payment, inducing higher net profit each month. You may similarly save on property taxes at the beginning given that your first year or so of taxes are expected to be based on the property’s value when you bought it. All of these things can add up to the highest possible return on your investment.

The Cons

Admittedly, with the potential benefits, there are a few drawbacks to possessing a fixer-upper property. As an illustration, it can be stressful to assess just how much work a fixer-upper property will need before it’s ready for a tenant. Accomplishing a professional inspection can help but definitely may not at all times find serious hidden problems with plumbing and electrical systems, the foundation, or other structural elements. Including hidden costs, a fixer-upper can likewise get mired in delays as you have the repair works done. If you’re delegating to a contractor, it may be stressful to get them to conform to an efficient timeline. If you’re doing some or all of the work yourself, it’s essential, to be honest in reference to how much time your pre-planned renovations will take and how much time you have to commit to the project. The longer repairs go on, the more potential rental income you will fail to receive.

Is It Worth It?

The answer to whether getting a fixer-upper is worth it or not is one that only you can answer. Every rental property owner is different, as is every property. To help assess a specific situation and determine if a fixer-upper property is an excellent fit for your skills and goals, it’s imperative to conduct an intensive cost analysis from the most comprehensive information you can acquire.

After researching and spotting several comparable properties in the area, distinguish what you think would be the property’s market value after the repairs are fulfilled. Thereafter, add up the total costs of buying and renovating the property. Be certain to add in every expense, including closing and carrying costs (mortgage, insurance, utilities, and so on), even the cost of materials and labor for all scheduled repairs. Moreover, add an extra 10% to 20% for unanticipated expenses. With your total costs in hand, subtract them from the estimated market value of the house. If your expected return is around 10% or higher, you might just have found a perfect bargain.

Nevertheless, a fixer-upper isn’t, at all times, the proper choice. For some investors, buying turn-key properties can be a more efficient but just as effective way to increase your monthly investment income. This is definitely true if the property you want to invest in is in a higher-end neighborhood, is undervalued by the owner, or has other amenities that make it fitting for a rental property. If you’d rather keep away from the hassle of construction, delays in leasing, and the costs of preparing a property for a tenant, then most likely a fixer-upper property isn’t the best decision for you.

Given that every situation is different, the conclusion to obtain a fixer-upper or not is one each investor must make. But certainly, that doesn’t mean you need to make it on your own. Real Property Management Focus has expert Frisco property managers to assist investors like you in preparing market analysis, setting rental rates, and locating potential properties for sale. Would you like to learn more about what we have to offer? Contact us online or call at 469-820-0088 today!

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