Investing in a fixer-upper is an underrated way to make a lot of money. As with most real estate adjacent business models, it can be pretty stressful, but if you can stick with it, you’ll stand a chance of generating heaps of profit.

However, it’s important to consider all the costs and risks involved before making the investment.

With that said, here are six important questions to ask yourself before investing in a fixer-upper:

What Is The Potential For Return On Investment?

The most important question to ask yourself before getting into any type of real estate venture is what the potential return on investment could be.

It’s important to research the area it’s situated at and find out what similar properties have sold for in the past.

This will give you a good estimate of what you can expect to make if you decide to invest.

You should also consider the cost of repairs as well as the costs for home renovations, and other expenses that will need to be taken into account when calculating your return.

What Is The Market Like?

It’s important to understand the local market and the current trends in real estate before investing in a fixer-upper.

Research the area to determine what type of homes are selling and for how much, as well as which areas are likely to experience appreciation in the future.

Knowing the market can help you make an informed decision and ensure that you’re making a smart investment.

How Much Work Is Required?

Many fixer-uppers require extensive fixing and it’s important to understand the scope of the project before investing. In other words, you should dedicate some time towards inspecting any property you’re looking to buy and assess the amount of work that might be needed to renovate it.

Beyond ascertaining the amount of work, It’s also important to consider the type of work that will need to be done, such as structural repairs, electrical or plumbing work, or cosmetic upgrades.

Knowing the amount of work required can help you make an informed decision and determine if the project is a good fit for your budget and timeline.

How Will You Fund The Home Renovations?

Fixer-uppers have been shown to cost upwards of $120,000 to renovate – so unless you have a large chunk of cash saved up, you’ll need to figure out how you’ll foot the renovation costs.

A great way to fund the home renovation costs would be to get a home loan from a lender.

Alternatively you could raise money by soliciting investments from friends or family and then paying them out when you’re able to renovate the home and sell it for a profit.

What Are The Risks?

Investing in a fixer-upper comes with certain risks and it’s important to understand them before making the decision to invest.

You should be aware of any potential legal or regulatory risks, as well as the risks of the property not appreciating in value or selling quickly. It’s also important to consider the risks associated with any repairs or renovations that need to be done.

Do You Have The Right Team?

Finally, it’s important to ensure that you have the right team in place before investing in a fixer-upper. You should have experienced and reliable contractors and suppliers who can help ensure that your fixer-upper gets renovated with quality materials, and within a good enough timeline.

It’s also important to make sure that you have an experienced real estate agent to help you navigate the market and find the best deals.