I've been spending a lot more time looking into properties that need some serious renovations, and it's interesting seeing how differently investors approach them.
I'm curious, when you're looking at a property that needs a lot of work, what's usually the biggest deciding factor for you?
Is it the purchase price, renovation costs, location, or something else entirely?
Would love to hear how everyone approaches these kinds of properties, especially those investing around Sacramento and Yolo County!
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 939 votes
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Quote from @Luna Aguilar:
I've been spending a lot more time looking into properties that need some serious renovations, and it's interesting seeing how differently investors approach them.
I'm curious, when you're looking at a property that needs a lot of work, what's usually the biggest deciding factor for you?
Is it the purchase price, renovation costs, location, or something else entirely?
Would love to hear how everyone approaches these kinds of properties, especially those investing around Sacramento and Yolo County!
For me, it always comes down to the spread between purchase price and ARV versus the structural risk of the project. Cosmetically rough houses in top Sacramento neighborhoods are great, but heavy structural fixes in high-cost West Coast markets can eat your profit margin fast if labor or permits blow past budget. That is actually why a lot of flippers end up looking out of state at Midwest markets, where you can buy heavy fixers at dirt-cheap entry prices and achieve massive cap rates or flip margins with far lower capital tied up at risk.
Great question, Luna. I think location, after-repair value, and renovation costs all play a major role, but one factor that sometimes gets overlooked is access to capital.
A property might look like a great deal on paper, but if the renovation costs stretch your available funds too thin, it can quickly become a challenge.
From the business funding side, I believe having financing options in place before purchasing can give investors more flexibility, especially when unexpected repairs come up.
I’m curious, are you finding that most investors in your area struggle more with finding profitable properties or securing enough capital to renovate them?