Rose Cottage Ltd

And the answer is as useless as usual…

“It depends.”

The real answer is there is no set rule for investing in real estate or even in making a purchase of a primary residence. What looks like a great deal to me may not look so hot to you. Financially, what looks like a good deal for purchase, may not be a great deal for investment…

Talking to yourself is normally frowned upon, but when it comes to a real estate purchase, you’d better know who you are, what you want, and what you are willing to do. Otherwise, no realtor will be able to assist you and chances are you will make a purchasing error.

I hate to keep picking on people from the HGTV Househunters episodes, but I’ve quickly realized that many home buyers can’t, don’t, or won’t distinguish between cosmetic upgrades and functional issues so here’s my take on what is important and what is not. Figuring out what is important to you will help you decide whether a property purchase is a “deal” or not.

If you want a turnkey property – meaning all you have to do is move in, then comments and concerns about paint colors and wallpaper are probably valid points for you because you don’t plan to or want to do anything to the property. Also, if you are expecting this to be a shorter-term property, you may not have the time or interest in doing anything that is near home “improvement.”

But for some on the HGTV series, they go in looking at homes “where they can raise a family,” (which they haven’t started yet!) and then immediately begin complaining about paint colors! Who cares? You can paint a room for around $150 – and that includes brushes! If you like the rest of the house and you plan on staying, worry less about the color of rooms and make sure instead that you have the square footage you need. Adding square footage is NOT a cheap improvement.

Ask questions about the age of the roof, and the age of the HVAC system, is the property prone to any flooding? Is the house on a well or is there a municipal water/septic system? These are the important and potentially expensive things to ask about – instead of complaining about icky paint colors and other minor dislikes. Only then can you decide whether your proposed real estate purchase CAN be a deal – even if not perfect at the moment.

On the flip side, (pun intended for Jeff Lewis fans!) are those who either overestimate their home improvement capabilities or, severely underestimate costs.

Take a look at this little charmer to the right. At least 95% of those interested in real estate should run like their hair is on fire from this property. No matter the “deal” price.

Without knowing or seeing anything else about this property or its location, I can guarantee it will require a LOT of work. Forget the neighborhood for the moment and forget comps. The property has been abandoned for who knows how long. Houses without electric (and possibly water) begin to “die” for lack of a better word – fairly quick. It looks like the front door is some sort of temporary deal – which may mean this house has been broken into – meaning who knows what may have been stolen or, how much damage may have been done.

I’m also concerned about the neighbor house. Can’t see a lot from the image but it looks WAY too much like the subject house. This would give me a first impression of a declining or declined neighborhood.

So could this still be a “deal”? Yes.

+ If you want a full-time job doing renovations – Yes.
+ If the rest of the neighborhood is full of renovated properties – Yes.
+ If you get inside and find all working appliances, no termites, etc., etc. – Yes.
+ If you can get this house for a “steal” price (whatever that is) – Yes.
+ If you have somewhere else to live during renovation – Yes.
+ If you have solid knowledge of the area – crime, economy, sales, etc. – Yes.

Otherwise – walk away.

This is an extreme contrast between turnkey and “fixer” but I am constantly amazed at how many people don’t seem to consider or even know the difference.