Buying a Fixer-Upper

Image Source: Shutterstock

For some home buyers, a fixer-upper is their idea of a dream home. Preparing for the process comes down to creating a plan, knowing what to look for, and understanding what financing options are available.

 

Create a plan 

Fixer-uppers require a future-oriented mindset. Knowing the magnitude of the project you and your household are willing to take on will help dictate your budget and expectations as time goes on. Understand that in addition to the down payment and closing fees, the costs inherent in a fixer-upper purchase have the potential to go over-budget easily. Familiarize yourself with permitting in your area to understand how to navigate any legal roadblocks in the renovation process.

 

What to look for 

Location: Whether you are purchasing a fixer-upper with plans to sell it, rent it out, or live in it, consider its location before purchasing. If you’re planning on selling or renting, location is one of the most important factors to making a return on your investment. And if you’re planning to live in your fixer-upper, keep in mind that location will be a large part of your experience in the home.

Scope of renovation: If you are looking for a smaller scale renovation, look for fixer-uppers that require cosmetic projects like new interior and exterior paint, fresh carpeting and flooring, appliance upgrades, and basic landscaping maintenance. More expensive and involved projects include reroofing, replacing plumbing and sewer lines, replacing HVAC systems, and full-scale room remodels.

Inspections: Beyond a standard home inspection, which covers components of the home like its plumbing and foundation, consider specialized inspections for pests, roof certifications, and engineering reports. This will help differentiate between the property’s minor flaws and critical problems, further informing your decision when it comes time to prepare an offer.

 

Financing options

Renovation loans allow buyers to finance the home and the improvements to the home together. Extra consultations, inspections, and appraisals are often required in the loan process, but they help guide the work—and thereby, added value—of your fixer-upper. Talk with your lender about which option is best for you.

 

  • FHA 203(k): The Federal Housing Administration’s (FHA) 203(k) loans can be used for most projects in the process of fixing up a home. In comparison to conventional mortgages, they accept lower incomes and credit scores.
  • VA renovation loan: With this loan, the cost of the improvement projects is combined into the loan amount for the home purchase. Contractors employed in any renovations must be VA-approved, and a construction fee may be charged by the lender.
  • HomeStyle Loan – Fannie Mae: The HomeStyle Renovation Loan can be used by home buyers purchasing a fixer-upper, or by homeowners refinancing their homes to cover the improvements. Funds are distributed directly to contractors via a separate escrow account. This loan also allows for luxury projects, such as pools and landscaping.
  • CHOICERenovation Loan – Freddie Mac: This renovation mortgage is guaranteed by Freddie Mac, allowing projects that bolster a home’s ability to withstand natural disasters.
If you’re interested in buying a fixer upper, just let me know and I’ll be happy to help you understand the process and discuss what makes the most sense for you.

Posted on September 29, 2020 at 3:04 am
Brandon Bidwell | Posted in Investors | Tagged , , , , , , , , , ,

Vacation Home or Income-Producing Investment

Whether you’re a skier who loves the mountain slopes of Colorado, a lover of the beaches of Southern California, or a potential retiree seeking to escape the snow-laden Northeast for the wide-open, sunny lands of Arizona, there are homes available to meet a wide range of budgets. The biggest decision a potential second homeowner must make is whether they are going to solely own their vacation home or turn it into a vacation rental. Here are the advantages and disadvantages to both options:

 

Investing in vacation rentals

  • Pros:
    • A good vacation rental property generally provides a healthy rental revenue which could potentially cover mortgage payments while also generating healthy additional profit.
    • Using an online short-term rental service like Airbnb makes it convenient to manage your rental property. Their website interface makes pricing, marketing, and communication with potential guests quite straightforward and easy. Airbnb will also oversee the billing process for you.
    • You may qualify for federal tax breaks and deductions related to your investment property. Everything from professional fees or commissions – including property management services- to cleaning and maintenance are potential tax write-offs.
  • Cons:
    • Vacation rentals can be costly to manage, both in terms of time and money. These properties may require seasonal upkeep and special maintenance considerations. You may even incur costs to maintain or monitor the property even when it’s not actively being utilized.
    • Vacation rental properties are particularly sensitive to seasonal fluctuations and economic downturns, which could leave you financially exposed if you suffer a lack of booking revenue.
    • Many states and cities are cracking down on short-term rental services. In California, for example, the fight has been primarily local, reaching a fever pitch in the San Francisco Bay Area. Increasingly state and local municipalities are seeking to reign in short-term vacation rentals, which could put a damper on potential revenue from these properties.
    • You may experience higher renovation and repair costs on a short-term rental. Most travelers expect the latest appliances and furnishings, so you will have to update every few years. Unfortunately, short-term renters are less likely to report any necessary repairs and guests are far less likely to treat the property with respect since there’s no sense of ownership or obligation.

 

Owning a vacation home

  • Pros:
    • Long-term profits: While assets fluctuate in value in the short term, vacation properties are more likely to retain their value and appreciate because they are located in popular areas with a geographically limited supply.
    • Familiarity: Returning to the same place time and after time can be comforting as you become familiar and comfortable with the location. It allows you the freedom to be yourself and the opportunity to expand long-term friendships with residents.
    • Convenience: The ability to conveniently store items that are used exclusively at the second home simplifies travel and packing.
    • Retirement head starts: Though we may love where we work and live, every place has its drawbacks. A common goal of retirement is to have a place to retreat for the times of the year we dislike the most at our main residence. Locating and buying a second home prior to retirement enables you to experience the benefits of a refuge before actual retirement, a time to correct and amend your plans if the reality is different than the dream.
  • Cons:
    • Initial purchase costs: Most people have higher expectations for a property that they intend to own, rather than to rent. These expectations can translate into high prices.
    • Home maintenance: As the homeowner, you are responsible for all home maintenance work.
    • Travel time: A second home will be located hours from your primary residence, requiring either long auto trips or airline flights.
    • Inflexibility: If you are paying a significant amount of money each month for a second home, you may feel that you need to constantly visit the property to justify your investment.

Posted on February 17, 2020 at 4:08 am
Brandon Bidwell | Posted in Buyers, Investors | Tagged , , , , , , , , , , , , , , , ,

So you bought an Investment Property, now what?

Investing in a home is a great way to build passive income but earning from your investment will take a little groundwork to become a well-oiled machine. This is your beginner’s guide to owning an investment property so you can set up that foundation properly to avoid future headaches.

 

Make sure it’s livable

It’s important to start with your home inspection before you start making plans. Use the inspection report to prioritize the maintenance issues.

Before a tenant moves in, make sure the home is livable. Handle the important items that affect the livability of the property, either now or in the near future. If the inspector noticed a leak in the roof or holes that could lead to infestation, take care of those first. Other maintenance issues to prioritize are the fuel and the hot water source.

If your city has inspection and registration requirements, be sure to cross check those inspection checklists with your current property. If the property wouldn’t pass now, make sure it will pass by the time the city sees it.

 

Upgrade the space

Once your property is in livable condition, it’s time to upgrade. If you have any left-over budget after the necessities are handled, consider adding a bedroom or a bathroom where you can find the space. These rooms heavily impact the rental price, and the more you have the higher the price. If there’s no space for another bed or bath, think about finishing the basement or upgrading some of the appliances to make the property more attractive to potential tenants.

Use similar properties in your neighborhood as your inspiration. These units are your competition, think about what you can add, or even take away, that would help you compete. Ask yourself what about your home is unique and in what ways does that affect your rentability? If every unit in your area has hardwoods, how can you make your carpeted home appealing? Maybe new carpet? Or is switching to hardwoods, or vinyl laminate that looks like wood, worth it?

 

Market it to future tenants

You need two things in your listing: 1) Great Photos 2) An Amazing Description

After you’ve perfected the property, it’s time to tell potential tenants that it’s available. Creating the listing is essential in drawing eyes on the unit so you can show it to as many people as possible.

Renters looking to move are quick to make their first impression of a property with thumbnail photos on a map. So, take lots of great, bright, photos of the entire place to showcase the amenities and show potential tenants what it looks like, then choose the best photo to be the first in the lineup. Remember to get the lighting is just right to show every corner of the listing. Dark photos scare tenants away, making them think the unit is dingy and dirty. Light and bright photos show a clean home that’s move-in ready. They can imagine themselves living there a lot easier than in dark and cramped looking units.

Next, they’ll read the description. This is again where other listings in your area can help you.

Read other listings to structure your description and to draw inspiration on what tenants might think is important. Find the selling points and emphasize those above the unique features, especially if those unique features are obvious in the photos.

Assess your investment on an annual basis. 

It’s a great idea to take a look at how your investment is working for you on a regular basis. Obviously market rents and cash flow are at the top of the list. Annual appreciation and tax benefits are something to keep an eye on as well. I have some great tools if you need help analyzing your income properties or if you are just thinking about getting started with your first investment property. Just let me know how I can be of assistance and I’ll look forward to hearing from you!


Posted on November 19, 2019 at 3:33 am
Brandon Bidwell | Posted in Buyers, Investors | Tagged , , , , , , , , , , , , , , , , , , , , , , , ,

How to Get Started in Real Estate Investing

Investing in real estate is one of the world’s most venerable pathways to building wealth. When properly managed, income from renting or real estate investment trusts can provide you with the financial security to plan out the rest of your life. The conclusion is easy to envision, but knowing where to begin can be overwhelming, particularly for anyone who has never previously owned a home.

At Windermere our goal is always to improve and support our communities, so we’ve put together a few key things to keep in mind as you enter the world of real estate investment.

Know the right type of investment for you

Investing in real estate needn’t commit you to being a landlord. A Real Estate Investment Trust (REIT) is a low-maintenance way to get involved in real estate with next to none of the day-to-day monitoring required of direct property management. REITs are trusts that typically own multiple properties, and investors may purchase shares within the REIT. Typically, as the value of the property rises, so too do the values of your shares. If you’d like to dip a toe into real estate investing before diving in fully, a REIT is a great place to start.

Start with your own home

Owning the roof over your head is a basic step towards investing success. Even better, when you plan to live in the home you’re buying (rather than renting it out), you will likely benefit from lower mortgage rates and a cheaper down payment. The reasoning is straightforward – lenders see a loan to people purchasing the home they live in as an investment in people highly committed to the property.

Once you’ve owned your own house for a few years, you can look to purchase a new home to move into. By purchasing the new home with the intent to move in, you’ll be eligible to receive more favorable financing once again. After you’ve secured your new home, your first home is primed to be transformed into a rental property, and you can continue to see a return on your investment. If you’re seeking further support with buying a first, second, or third home, our website and our agents are full of information.

Cast a wide net

The best investment opportunity isn’t always going to be right underneath your nose. While there are logistical benefits to focusing locally with your investment, you may miss more profitable opportunities in another burgeoning market. Real estate is a long game, and patience tends to be rewarded. There’s no cause to rush a decision of this magnitude, so investigating other states and regions to find the property that best fits your situation is a process worth considering.


Posted on November 7, 2019 at 3:06 am
Brandon Bidwell | Posted in Buyers, Investors | Tagged , , , , , , , ,

5 Deal Breakers That Can Blindside Home Buyers

 

Purchasing a home can be a complex endeavor for even the most well-prepared home buyer.  You’ve diligently saved for your down payment, followed the market, researched agents and now you are ready to make an offer on your dream home.  Don’t let these 5 “Deal Breakers” come between you and your new home.

 

    1. Big Purchases on Credit. It is tempting to buy the furniture for your new home or a new car for the garage before the sale closes. Take care if you are making these purchases on credit. Large purchases on credit can have a major impact on your credit profile which effects your mortgage application. It’s a better plan to wait until after closing or pay cash for these transactions or you may be putting that furniture in a different living room than you originally picked them out for.

 

    1. Overpaying. Before your bank will approve your mortgage they will appraise the home you are purchasing.  If they feel you are overpaying they are likely to decline your mortgage application. If you find yourself in this situation consult with your agent on renegotiating your offer to be more in line with the bank’s appraised value.

 

    1. Purchasing too close to Foreclosure. If you are making an offer on a house which is facing foreclosure be sure to have a closing date set before the foreclosure date. Have your agent work with the lender to structure closing before the house goes back to the bank and into foreclosure.

 

    1. IRS liens. You’ve heard the old saying “Death and Taxes”.  Back taxes and liens can derail your attempts to get financing for a mortgage so be sure to have your books in order before filing your loan application.

 

    1. Comprehensive Loss Underwriting Exchange (CLUE). CLUE is a database of insurance claims for both people and property.  Your home insurance rates are determined by the information about you and the property you plan to purchase which is contained in this report. Past claims for water damage, falling trees and even dog bites from present and past owners can multiply your insurance rates. Consult your agent about the CLUE report for your future home as soon as possible once your home purchase offer is accepted.

 

When purchasing a home there will be challenges which you can plan for and the unexpected hurdles.  By educating yourself as a consumer and choosing a well trained real estate agent you can avoid many of the pitfalls of 21st century home ownership.

 

What about you? Tell us if you have had any “deal breaker” experiences.


Posted on October 9, 2019 at 11:40 am
Brandon Bidwell | Posted in Buyers, Investors | Tagged , , , , , , , , , ,

Price Reductions

Some fascinating research from the Denver Metro Association of Realtors…

37% of properties that sold last month along the Front Range had a price reduction at some point during the listing period.

Property owners who have to reduce their price take an average of 58 days to receive an offer.

Those who don’t have to reduce their price only take 13 days.

This stat obviously speaks to the importance of pricing your property right on day one.


Posted on October 8, 2019 at 3:33 am
Brandon Bidwell | Posted in Buyers, Investors, Sellers | Tagged , , , , , , , ,

Fort Collins Appreciation Ranked!

 

The latest report from the Federal Housing Finance Authority is hot off the press. They rank 241 major metropolitan areas across the U.S. for yearly home price appreciation.

They show that, nationally, home prices have gone up 4.99% over the last 12 months.
Here’s how the major cities rank in Colorado among the 241:
 
#22 Greeley = 7.94%
#27 Colorado Springs = 7.64%
#63 Fort Collins = 6.34%
#133 Denver = 4.83%
#188 Boulder = 3.41%
 
** Interesting fun fact: In the WORST economy of our lifetime (2008 recession), home appreciation in Fort Collins only went down 2.2%. Compare that to places like Las Vegas that went down by over 35%! Now that’s a stable economy.**

Posted on October 5, 2019 at 5:53 am
Brandon Bidwell | Posted in Buyers, Fort Collins Real Estate, Investors, Market Data, Sellers | Tagged , , , , , , , , , ,

Quality Multi-Family Investment in Fort Collins!

Opportunities like this in Fort Collins are rare! 4 units each with attached two car garages, fireplaces, decks, and extensive upgrades. Just some of the updates include a new roof, updated kitchens and bathrooms, new decks, new blinds, new furnaces and water heaters in all units, new sliding doors, and Unit B has a recently finished basement. Close proximity to I-25, CSU, and Old Town make this property INCREDIBLY attractive to renters, quality investment property. Contact Brandon Bidwell at (970) 215-1573 for your private showing, more information or click the link below for more details.

http://bidwellrealestate.com/search/1600_Edora

 


Posted on October 4, 2019 at 12:29 pm
Brandon Bidwell | Posted in Fort Collins Real Estate, Investors | Tagged , , , , , , , , , , , , , , , , , , ,