Buying a "fixer-upper" can be a very rewording and ambitions undertaking. Your number one guideline is the location of the home. Choosing the right location is very important, especially in Perth. Neighbourhoods are evolving and extensive research on the evolution of the “desirable” neighbourhoods could be a key to your success.
The price of the property also plays a big role in investment formula. There is a simple equation involved when calculating a number for an offer. You should first add up all the costs involved in renovation of the property, which should be based on the property condition. Make sure you choose the right building inspector for this in case you don’t know much about construction and remodeling in general. Make sure you include all the necessary labor and materials going into this effort. Choosing the right building inspector is critical in identifying the major problems with the building.
You should deduct the price of the necessary repairs from the price of the home and ensure that your offer to purchase accounts for the existing defects. If possible – obtain three quotes from licensed general contractors to repair all necessary repairs and make sure you ask the contractors about any other projects that arise from necessary repairs. For example if you are repairing a structural wall, there will be interior repairs associated with it since interior and exterior surfaces share a wall.
Another example is when repairing or replacing a foundation, be ready to repair all the door jambs and window openings, some drywall work will need to be performed and the entire interior will most likely need to be painted due to multiple cracks and damage from re-alignment of the structural framing of the building. Contractors will not talk about this unless you ask them – they are interested in winning the project.
It is best to add 10% to all estimations, these funds should be used in case you come across any hidden obstacles or issues that need to be resolved. It’s very important to have an inspection clause on your real estate contract. If needed, the inspection clause will help you back out of the real estate transaction. Last thing you want to do is to get stuck with a very bad investment.
Always be there at the time when prospective investment property is getting inspected, follow your inspector everywhere, ask questions. Create your own set of questions ahead of your inspection, ask your inspector as many questions as you can. Most importantly – avoid serious structural problems. Every investment should start with good bones. Repairing foundation for timber homes and extensive structural repairs are two of the most expensive building repairs known today (image courtesy of flooringamerica.com).