Whether you just want to invest some sweat equity to secure your future financial well-being or you want to create a signature showpiece from an “almost perfect” home, you can put the laws of leverage on your side with the right guides.
To earn your black belt as a “Savvy Fixer Upper” you’ll need first to harness the superpowers of a strong team: a realtor with x-ray vision, a flexible lender who can think outside the bank, and depending on how much work you’ll do yourself, a contractor with imagination.
Start with Good “Bones”
Realtors with “x-ray vision” can quickly tell when a less-than-loved home has “good bones” to build on. They’ll also know which zip codes are hot and up and coming. Smart money buys the most modest house on the block and transforms it to match the cap the street can garner. In general, you’re looking for “soundness” of structure, location, and resale strategy.
Upside Multiplication
Identifying up-and-coming neighborhoods is a great way to multiply your future gains. Look for predictive neighborhood clues such as road repaving, new cafes (especially Starbucks!), restaurants, and bars, according to the Harvard Business School. Other indicators to watch include a rising “Street Score” and a pattern of development that includes florists and grocers.
Leveraged Lending Strategies That Can Help
Your lending partner will guide you through the process of finding the right loan fit and the best way to leverage your assets given your unique set of circumstances. Some of the strategy or product options may include:
- Finance renovations with money saved by diverting a conventional 20% down payment and instead doing 3 – 5%
- In some cases, you may be able to create a PMI payoff plan or avoidance
- FHA 203(k) Loan – backed by the federal government, allows property value plus cost of project or 110% of finished appraised value (whichever is less)
- Fannie Mae Homestyle® Renovation Mortgage – allows property value plus cost of project, but has stricter borrower qualifications and no sweat equity allowed
Whether focused on long-term financial gains or creating your dream home to live in, a strategic plan for a purchase-renovation combo can set you up for solid gains.
