How To Purchase Homes For Renovation And Resale
REM # A628
By Ilyce R. Glink
Summary: A reader skilled as a carpenter would like to purchase a fixer-upper and resell it. Ilyce suggests finding a partner, using a 203(K) rehab loan or finding a HUD home.
Q: I would like to purchase a home that is in need of renovation, repair the
home, and resell it for profit. The only problem with this plan is that my financial
resources are limited. The good news is I am skilled in construction and willing
to work hard.
What would be the most appropriate way to fund these home improvement projects? I’m looking for a way to make the biggest profit with the least amount of risk. Thanks for your help.
A: It sounds to me like you need a partner who can front the money you need
to purchase the home. If you don't want to take on a partner, you might be able
to get started by purchasing a HUD home, which doesn't cost that much cash,
or using an FHA 203(k) rehab loan.
The 203(k) rehab loan might be an interesting choice. It allows you to borrow
enough money to purchase the house and then allows you to borrow more cash to
finance the rehab and renovation of the property. For more information on 203(k)
loans, go to the Department of Housing and Urban Development's website, www.HUD.gov.
If you already own a home, and you’ve built up the equity by paying down
the mortgage or doing some renovation projects, you could take out a home equity
loan. That would likely be the least costly way to start your real estate investment
career.
If you don’t own a home, look for a property that you can live in while
you fix it up. If you live there for at least two years, when you sell the home
you can keep up to $250,000 (up to $500,000 if you’re married) in profits
tax-free. That will give you an excellent base of cash for purchasing your next
property.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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