Q. Campbell has evolved as an amazing small town, there are still quite a few Fixer Uppers out there and am wondering if now is a good time to invest a bit of sweat equity?
The answer will depend on the actual property. In general, Campbell is a good strong neighborhood. The return will depend on crunching the numbers. Make sure you obtain all the right inspections on the property you are interested in. In this market, many times the seller can be coaxed into paying for all the inspections. Once you know what the repairs are, touch base with a Realtor (or three) to find out the current market value of the home and neighborhood. Most investors look for properties they can get for 30-50% under market value.
Knowing the repairs needed will help you negotiate the price down to the “investment price”. If you are planning on renting the property, make sure you take a peek at Craigslist.org and local papers to see what rents are running. Add in 2-10% maintenance/management costs and make sure the rent can cover this with some additional cash flow. The CAP rate (http://en.wikipedia.org/wiki/Capitalization_rate) is what normally tells the investor whether or not this is a go-no-go. Many times, California properties become long term investments as the CAP rates tend to be pretty low.
Look for properties that have been on the market for a long time. The ones that have been noted on the MLS as pending and then back on the market tend to have motivated sellers. Getting your price may take patience, but it is a big key to getting your money back.
Finally, the cost of repairs depends on how much you can do yourself and how much you have to hire professionals. Be careful with items that require licensed contractors (electrical, room additions) as they will make a difference in what you can ask for in the end. Don’t cut corners with permits. It only bites in the end.
Got a real estate question? Talk to CJ!
Tags: Talk to CJ