A trap for new investors
If you’re new to the investment property search process, beware of getting sucked into the notion of rehabbing a gracious Victorian…or Colonial, Carriage House, Farmhouse or any period property exuding tremendous charm. The property may have fallen on hard times, and you may feel you’re just the person to bring it back to its former splendor. And then turn a profit on it when you rent it out and /or sell it.
Unfortunately, older, period houses usually come equipped with renovation costs that can skyrocket out of control very easily. Costs that the average property does not share, and that you may not properly account for when you crunch your numbers, and come up with your overall rehab budget. It would be sad indeed to purchase an older house at a great price, only to discover you’re sinking in red ink as your fix-up costs spiral out of control, and way beyond what you originally planned on.
Remain emotionally detached
Remember, this is not your home you’re considering purchasing. Always keep in mind as you go about your investment property search, that this is an investment property that requires you to be emotionally detached from it in order to become, and remain, profitable. Otherwise, you might as well consider investing in some other emotionally-laden investments…like a Broadway show for example.
Consider what an older house brings to the table: sash windows that are paper-thin by today’s standards, and also are quite leaky – producing many drafts, thereby increasing your heating costs. Also think about the costs of rewiring hundred-year-old electrical wires and circuits throughout the house. And how about replacing antiquated plumbing lines and fixtures as well. On the whole, your repair costs could run 25% to 50% higher on an older property than on a newer one.
According to a 20/20 Research report, 38% of Victorian property owners felt that their property had not been a good investment. And these were actual homeowners – not simply property investors. Clearly there is a disconnect between “falling in love” with a property, and actually fixing it up and maintaining it.
Look for newer properties first
The best investment property search results, and therefore yields, can usually be found through investing in newer houses that need less repair work to begin with, and which will cost less to maintain in the long run. So as you begin your investment property search, always be wary of your own emotional tugs to older homes. And be sure to check them at the door.
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