Above all, rental real estate investments are excellent, low-risk investments. Even during a downturn in the economy, such as a recession, investors can continue to profit from rental properties.
Buying fixer-upper homes is currently a popular investment in the housing market, especially since lower-priced houses increase housing confidence in home buyers. On the one hand, it is a great way to purchase a home below market value and sell it for more than you paid.
If you're talking about a fixer-upper with pretty major renovation costs, you're going to have to spend at least 10 percent of the home's value, or around $30,000. And that's before you start talking about the brand new kitchen.”
Importantly, Australian property is very resilient. In research that I recently completed for the Property Investment Professionals of Australia (PIPA), it showed that house prices did not drop in value en masse during or straight after the recessions of the 1970's, 1980's, 1990's and the GFC.
Stocks that weathered the 2008 and 2020 recessions:
If you live in an area that's farther from major cities and has fewer job opportunities, you may see some decrease in rent, or at least a stabilization without annual increases. ... Subsequently, while rent prices should theoretically go down substantially during a recession, they only inch down, if they move at all.
Most lenders aren't going to finance a fixer-upper with a traditional mortgage. After all, they aren't going to approve a loan for more than the home's current value. Turning to a home equity loan won't work either since you won't have any equity built up on a new purchase.
Structural Repairs. The most important determining factor in whether or not a fixer-upper is worth the work is the type of repairs it needs. Generally speaking, cosmetic repairs cost much less and are easier to complete than structural, electrical or plumbing repairs. Cosmetic repairs simply take time and commitment.
Buying a home is expensive, therefore anything a first-time homebuyer can do to reduce the cost, like purchasing a lower-cost fixer-upper, is worth considering. Obviously, an updated home will always be more expensive than a fixer-upper.
Fixing up a house can be profitable, but investing a few hundred dollars in repairs and upgrades may not add thousands of dollars of value to your home. In fact, the average return on your remodeling investment is 20 percent or 30 percent less than you spend.
The best home renovations in 2020
If you spend more, the value of the renovation will not proportionally add to the value of your home. For example, if your home is worth $100,000, the maximum you should spend on a kitchen or bathroom renovation is $15,000. If your house is worth more, the spend on a renovation could be higher.
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