Do not pay or spend more. “At least a couple of times it has saved me buying at very low prices,” explains Erickson. The more you save on the purchase price, the higher the cushion you will have to cover errors or unexpected expenses.
It also helps to keep the type of renovation within reason, taking into account the area where the property is located. In other words, that considerable Jacuzzi and imported marble for the master bathroom may be a steep investment to recover from the sale price of a house in an average neighborhood. Nor will you find many buyers interested in exotic landscaping work in the garden.
To avoid investing more than the account, it is recommended to estimate the sale price of the house after the renovation. Take 70% of that figure and subtract the costs for remodeling. That’s what you should pay to buy the house itself. “People say, ‘My God, that’s a gigantic profit margin,’ but when you include the financial costs and expenses during the sales process, you will realize that the profit is not as high as you imagined,” Erickson concludes.
Consider The Less Obvious Expenses
Julia Chung, financial planner and real estate developer at JYC Financial, in Canada, warns that it is crucial to take into account all the costs involved in this business. “Do not forget things like property taxes, public services, interest on the credits you have, home insurance policies and the costs associated with the sale process.”
In the United Kingdom, there are taxes on the sale of properties, which makes this type of business less profitable. In Canada, you have certain benefits when selling the house if you have previously presented it as your main home, but you have to live in it for a certain period. All these elements must be considered as part of the sale process of the house.
Make sure you can pay
“One of the big obstacles is financing because 95% of banks do not want to lend money to people who are dedicated to buying and selling properties,” says Ferguson.
“They want to lend money to people who will be in the property for a long time.” If you already have a good history of buying and selling properties, you may have the support of a local bank, but at the beginning, it will be difficult for you to borrow money.