People love to buy fixer-upper rental properties in DFW and there are plenty of advantages to doing so. However, many property owners fail to weigh both the pros and cons of investing in a property that needs a little extra TLC.
So today we will show you both sides of buying a fixer-upper property so you can better decide whether to take on a project or invest in move-in ready.
Things a fixer-upper might need include:
• Light cosmetic work such as a fresh paint job or new carpet
• Roof and wall work
• Landscaping in both the front and back yards
• Foundational work
• Plumbing and/or electrical work
Pros of Buying a Fixer-Upper Property
The biggest advantages of purchasing a fixer-upper property is the price. For those that want to purchase an investment property but may not have the extra cash to afford move-in ready homes or for those looking for a great deal, a property that needs work is often a perfect solution.
In a popular and growing area such as DFW, it can be tough to grab a nice, move-in ready home for a reasonable purchase price especially in the current markets. This is especially true because many property owners don’t want to invest in fixer-uppers because they do not want to invest the time and money to make the property move-in ready.
Increased Positive Cash Flow
Buying a fixer-upper property at a lower purchase price than that of neighboring properties has the potential to generate more positive cash flow. For example, buying a rental home below full value price means lower mortgage payments. It also means more money in your pocket when you charge competitive monthly rent rates.
Property Tax and Loan Savings
Since property taxes are based on a home’s sale price, your property taxes will be significantly less if you buy a fixer-upper as opposed to a move-in ready home.
Cons of Buying a Fixer-Upper Property
Although you may be able to save money on a fixer-upper thanks to a discounted purchase price, property tax savings, there are possible hidden cost once the rehab work begins.
For example, you might start remodeling your property’s kitchen cabinets and then realize your entire kitchen actually needs electrical work. Or, maybe you will discover your antique fixer-upper home is covered in lead-based paint. If the home is older then there is a good chance there will be some rotten wood in the roof structure, mold, a leak, broken sprinkler system, you never know what you will find! Ultimately this means more money and more work.
Buying a move-in ready house means that you have the luxury of leasing the home to tenants right away. And that is one of the reasons they cost so much more. However, if you buy a fixer-upper, whether it needs minor repairs or an entire rehabilitation, there will be work involved which can often take several weeks to several months.
Sometimes purchasing a fixer-upper will cost you more in the long run than if you had just bought a move-in ready home. It is important you do your research before making a final decision on a fixer-upper property. This includes listing the necessary repairs and upgrades you will be making, and comparing the overall cost for these repairs. It is also wise to have the home thoroughly inspected before you purchase to decide if this is the right project for you to take on.
In the end, fixer-uppers will likely save money, and give you an edge in the rental property business. That being said, they are not easy to deal with and present numerous increased risks. If you are looking to buy a fixer-upper in the DFW area, make sure you look at all the factors before making your final decision.
In addition, if you are looking for some help managing your fixer-upper rental once it is complete, Give us a call! We would love to help you in managing your new investment property! With over 30 years’ experience, All County Property Management Group has the knowledge, experience, and staff to manage your rentals so you don’t have to!