Of all the real estate investments you could make, an unfinished home is one of the riskiest. But in the right circumstances, it could also be easy money.
An unfinished home is just that: a house that was under construction and the construction was abandoned before completion. Unfinished homes could be nearly finished, barely begun, or anywhere in between.
Is this a purchase you should consider?
Benefits of Buying an Unfinished Home
Why purchase an unfinished home? There are several potential benefits:
- The price will typically be extremely low. In some cases, you may even be able to buy the entire property for less than the lot alone would sell for.
- If the home is nearly finished, with the roof, windows, and doors already in place, it may be completable without much more investment.
- If the work is barely started, you could potentially bulldoze the construction and then sell the property to turn a profit.
Risks of Buying Unfinished Construction
There’s a lot that could go wrong with buying an unfinished house. Discretion is necessary.
- If the property has been abandoned for a long time, it may be an absolute mess inside. There could be animal life or even squatters in residence.
- The realistic market value of an unfinished house will drop rapidly the longer it’s been abandoned and unkempt.
- The costs of dealing with it – finishing or demolishing – may ultimately eat any profit you could have made.
Other Factors To Consider
What should you examine when deciding whether a particular unfinished property is worth the investment?
The hotter and drier the local environment, the less damage will be done to the extant construction. Buying unfinished homes in a wet climate is rarely a good idea because they deteriorate quickly.
Often, tax assessors will make an initial valuation based on what the value would be if the house was finished. For example, it might be worth $100,000 on paper, but only a tenth of that in reality. This could be an advantage or disadvantage, depending on your situation and goals.
It’s tough convincing people to buy an unfinished home. Think about whether you can realistically make a profit.
Unfinished houses can be a high risk/high reward investment. In the right situations, you could get a property for a song and quickly flip it for a profit. But you could also just as easily get stuck with a costly and rapidly deteriorating encumbrance.
When it comes to selling a home, a lot of homeowners want to sell as quickly as possible. This is understandable; after all, the longer your property stays on the market, the harder it becomes to sell and the more it will end up costing.
Many home sellers are blinded by the emotional connection they have with their homes and don’t realize the house itself may not be ready to sell. If it’s not prepared to sell, there’s a pretty good chance it won’t. Here are a few things that can lead to listing an unsellable home:
- Code violations: If a home is not up to local building code standards, it could be difficult and expensive to get the home up to par. This can be a major issue for potential buyers because code violations can result in hefty fines or even property condemnation. Anything from an unpermitted DIY (do-it-yourself) addition to an in-ground pool installation could have a code violation and make the home difficult to sell.
- Inadequate curb appeal: Sometimes, a home’s appearance can be its own worst enemy. If your home is unkempt and doesn’t have much curb appeal, it can be a major turnoff to potential buyers. A buyer’s first impression of any home is often the most important, and if it’s unattractive from the outside, then it may be hard to entice buyers to schedule a time to look inside.
- Overpricing: In some cases, a home might be on the market longer simply because it’s priced too high. This is why it’s important to work with a professional real estate agent who can help you determine the right price for your home based on its condition and the current market.
- Unaddressed repairs and maintenance: A house with multiple repair and maintenance issues is likely to be an unsellable home. Most buyers won’t buy a home with serious issues. Even minor problems can leave a bad impression on buyers. After all, if it’s obvious a house requires minor repairs and maintenance, who knows what kind of major problems lie hidden beneath the surface?
These are a few of the things that cause an unsellable home. For more advice on selling your house, be sure to contact us at Randy Lindsay today.
A new construction home is a house that has just been built. No one has lived in it, and it is for sale for the first time. You often find them in newly developed subdivisions or trending areas that have upscale renovations. There are many advantages to buying a new construction home, but there are also a few potential drawbacks.
Keep these pros and cons in mind when considering buying a new construction home.
Pros of Buying a New Construction Home
Some of the reasons you might want to buy a new construction home include:
- Because they’re brand-new, they don’t generally have need-to-repair issues.
- New homes often qualify for lower insurance premiums than older homes since they are designed to meet stricter guidelines.
- Newly constructed homes are usually located in great neighborhoods and near modern shopping centers and conveniences.
- These homes often have warranties on both the home and its appliances because everything is new.
- They are often more up-to-date, with modern amenities and design features. You may find they are equipped with energy-efficient appliances and other features that could save money on monthly utilities and deliver a long-term return on investment (ROI).
Cons of Buying a New Construction Home
Although there are many advantages to buying a new construction home, there are a few potential disadvantages. These can include:
- New homes can sometimes take a long time to build, so you might have to wait several months before you can move in.
- There’s not a lot of variety when it comes to buying a new construction home in some areas. If all the homes “look the same,” to you, there’s often not much you can do to customize without HOA (homeowners association) approval.
- They are generally more expensive than older homes. You may need to pay more money upfront.
Speak With a Real Estate Agent Today
Be sure to consider all the pros and cons if you’re considering buying a new construction home. A real estate agent can help you find the perfect home that fits your specific needs and can offer guidance throughout the homebuying process.
For additional advice on buying a home, be sure to contact us at Randy Lindsay today.
If you are moving out of your home or own a property in which you don’t reside (for example, an inherited property), you have two options: You can sell the house or rent it. To decide between selling a house or renting it, be sure to weigh the pros and cons of both.
Pros of Selling a House
- Finding tenants or filling vacancies won’t be a concern.
- If it’s a seller’s market, you could make a substantial profit by selling a house.
- There will be no need for long-term management and maintenance of the property.
- You will receive a large amount of money quickly, which is helpful if you plan to buy another home.
- You won’t have to worry about making repairs or dealing with tenant complaints.
Cons of Selling a House
- Selling means there will be no opportunity for long-term profits from your property.
- There are a lot of costs associated with selling a house, including marketing, staging, repairs, and code-compliant renovations.
- Trying to sell a house can be stressful and may not always happen right away.
- You may not be able to get the price you want for your property in a buyer’s market.
Pros of Renting a House
- Monthly rent payments can generate dependable, long-term income.
- Rental income profits can keep increasing if your property is in an area where the rental market is strong and growing.
- You can deduct expenses associated with renting the property: insurance, maintenance, repairs, taxes, etc.
- Your property is likely to increase in value, which can result in profits if you decide to sell it later.
Cons of Renting a House
- If you’re uncomfortable dealing with tenant complaints or disputes, this will be an additional challenge in rental management.
- Long-term vacancies and lost income can occur if you can’t find tenants.
- Making repairs and keeping the property in good condition is an ongoing responsibility.
- Upgrades and renovations may be needed to attract tenants.
- You or your property manager will be responsible for finding and vetting tenants as well as collecting and managing rent.
Ultimately, it comes down to what works best for your individual situation.
Selling your house is a good option if you want to make a quick profit and don’t want to deal with managing a rental property. But if long-term, steady rental income is appealing, renting your house might be the right choice.
For more real estate advice, contact us at Randy Lindsay today.
Code violations refer to incidences of breaking local building codes and zoning regulations. If a home has been built without the necessary permits, or if it is not compliant with local building codes, it may have code violations. If your home has code violations, you’ll want to consider the possible consequences before selling a house without addressing them.
Can You Sell a House With Code Violations?
If selling a house with code violations, it is important to determine the extent of the violation(s) and any potential liabilities. Depending on the type of violation, the seller may be liable for any repairs that need to be made.
Even if the buyer is willing to purchase a house with code violations, their mortgage lender may forbid it. For example, FHA (Federal Housing Administration) loans don’t allow borrowers to purchase properties with outdated electrical panels. And some local and state authorities require sellers to fix certain safety issues before the property can be legally transferred.
Here are a few tips for dealing with code violations:
- Identify and document the code violations: Before attempting to sell a house with code violations, it’s important to know the extent of the violations and potential liabilities.
- Get an estimate for repairs or necessary fixes: Determine how much it will cost to bring your house up to code so you can accurately assess any potential liabilities.
- Consider selling the home in “as-is” condition: If you do not want to incur the cost of bringing your house up to code (and aren’t legally required to), you can consider selling it in its current condition by listing it as-is. Doing so puts the responsibility for repairs in the hands of the buyer. You will be legally obligated to disclose all known code violations and potential liabilities.
- Address all code violations before selling: Although you could list your home as-is, doing so will likely hurt the sales price, and you may not be able to find a buyer willing to take on the responsibility of repairs. If possible, it’s best to address all code violations before attempting to sell the home.
When it comes down to it, you can sell your house despite code violations. However, doing so can scare away many buyers and reduce your potential sale price. Contact us at Randy Lindsay today for more tips on selling a house.