The real estate market is hot right now, especially in Florida. Currently, there are not enough homes on the market, so sellers are not willing to give buyers the great deals they got during the years following the market crash. But real estate can still be a winning proposition for you as an investor if you’re willing to put a little time and effort into your investment.
In other words, don’t put your money into beautifully finished homes; the person who did the work on those homes is going to want top dollar. Instead, look for a Cinderella property, and be the fairy godmother that makes that home beautiful. These four steps will help you identify a Cinderella property and see a better return on your investment.
Look for the worst homes in good neighborhoods, neighborhoods in which other properties have been renovated or have been kept up over the years.
Whether you have the budget for a mansion or a starter home, your budget will be the determining factor for the neighborhoods you search. But even in areas of town that many people would consider undesirable, you can find neighborhoods where the owners and tenants take pride in their homes. Those well-loved homes bring higher prices than the neglected ones in similar neighborhoods.
Your goal will be to make the ugliest home in that lovely neighborhood into a gem. Whether you choose to renovate and make the property your home, or you choose to renovate and then sell or rent the property, your renovations will add more value to a home that is nestled in a well-tended neighborhood.
Once you’ve identified a potential neighborhood, look deeper.
The neighborhood may be lovely on the surface, but don’t just trust your first impressions. Do some research. Check the crime rate in the neighborhood. Visit the property several times, during different times of the day and night. Drug dealers on the corner or neighbors who throw noisy parties could be deal breakers for you. Familiarizing yourself with the daily activities in the neighborhood could save you from buyer’s remorse.
Make your purchase contingent on the results of a home inspection.
Don’t trust your gut instinct when looking at a home. There may be hidden problems that will be uncovered during renovation and that will eat up your renovation budget. Hire reputable home inspectors. They will climb on the roof, crawl through the attic, and crawl underneath the house to look into electrical issues, plumbing issues, or foundation issues that could make the property a money pit instead of a source of profit.
Look for good bones. Renovations can solve problems of outdated cabinets or ugly paint colors, but solving problems with termite damage, a foundation issue, or an outdated or inadequate electrical service can be costly and time-consuming.
Make renovation decisions based on the décor of the homes in your neighborhood.
If the property is in a low-income neighborhood, you can get away with laminate flooring, stock cabinets, and basic appliances. But for properties in high-end neighborhoods, don’t skimp on flooring, cabinetry, countertops, or appliances. High-end finishes are expected in high-end homes, and they add value to the home.
Also, before renovating, consider your end plans for the property. If you plan to live in the home, it’s okay to paint jewel tones in every room and put an Egyptian mural in the bedroom. But if you’re planning to rent or sell the property, keep things neutral: wood flooring or beige carpets and neutral colors on the walls. Create a blank canvas that allows buyers or renters to imagine themselves living in the space. They will be more likely to say yes to the deal if they can picture their own furniture and artwork in the rooms you’ve renovated.
Investing in real estate can be challenging, but it can also be fun. Bringing a beat-up old home back to life can be rewarding, both emotionally and financially. If you choose to invest in real estate, do your research or, better yet, find a reputable realtor who knows the market and, preferably, has experience working with investors, then keep your own head in the game. It’s easy to fall in love with an old home that needs love, but don’t commit too soon. Make sure the house has financial potential before you commit to investing your time and money.
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