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Do The Fixer by yandiadi

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Do The Fixer

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									Do The Fixer-Upper Math

Renovating homes has gotten a boat load of publicity over the past few years as a great way for
prospective real estate investors to make great money over a short period of time. Hopefully, you've
taken that message with a grain of salt as renovations can often take a lengthy period of time and
selling the home for a big profit is never a guarantee.

In fact, as any real estate investor will tell you, a few quick calculations will give you at least a rough
idea of your chances for profit, be it large or small. Doing these quick and dirty calculations will not
only give you that forecast of the future but determine whether a particular investment is worth the
hassle, a step that many real estate investors skip that deserves adequate attention.

Target Your End Value
You can never, ever use the amount of money you put into a particular piece of real estate as the
basis for a price increase. If you bought the home for $100,000 and did $20,000 worth of work to it,
you are never guaranteed to get $120,000 out of it. The real estate market simply does not work
that way and recognizing that is the first step towards pegging down an accurate end sale price for
your profit calculations.

An appraiser is your best resource at pegging an end sale value as the appraiser will be able to tell
you the kind of value you will add to a property with a given renovation. If you are going to add a
certain amount of square footage or a finished basement or any other improvement, take what the
home will look like after you are done and compare it against other similar homes that have recently
sold in the area.

That is the only way to determine the kind of value you might receive and an appraiser will keep you
grounded in reality when your head starts swelling with the prospect of potential profit.

The Big Minus
Of course, those renovations cost money and you will have to calculate every piece of dry wall, every
nail and every hour of labor that you think will be necessary to get a home to the level you need it to
be at. After those costs, you have to factor in transaction costs like your realtor's fee, closing costs,
potential property taxes over the course of your ownership and loan fees that some real estate
investors neglect to think about.

Your expenses are not limited to the amount of money you put into renovations, giving you much
more to think about than lumber and nails when you are calculating potential profit. This can be a
complicated process and getting expert help from someone that has been through the process once
or twice before will be invaluable towards projecting potential profit.

Is It Worth It?
This is the big question that some real estate investors forget to ask themselves as they pursue a
potential investment. If your profit window is extremely tight and your potential profit may be
$10,000, perhaps that investment is not worth the hassle of renovating the home, putting it on the
market and finding a new buyer. You have to decide for yourself what your time is worth but just
because there is profit to be had does not mean that your time is best spent on that project.
Everyone's threshold is different so determine yours and you will go a long way towards picking out
projects that you will ultimately be successful with and enjoy.

These simple steps can save real estate investors from getting involved with properties that they are
simply not ready for. Think about all of the costs before ever getting involved with an investment
and learn to value your time. Doing the math is one thing, but using it to make an informed decision
is what separates the real estate investors that fail and those that ultimately thrive.

This is another original article by Joe Lane, co-owner of The Lane Real Estate Team at
http://www.joelane.com/. Are you looking for an experienced Tri City WA Real Estate agency? With
20 years of service based, business experience, Joe and Colleen Lane work hard to serve home
buyers and sellers for the Tri Cities of Washington's Kennewick, Richland, Pasco, and surrounding
areas.

								
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