A Cheap House Is Not Necessarily a Good Investment

Everyone likes a bargain. Whether you're buying a home to live in, a rental property, or a fix-and-flip, it's natural to be attracted to a house with a low asking price.

But in real estate, cheap and good value are not necessarily the same thing.

A property can have the lowest price in the neighborhood and still turn out to be the most expensive mistake you make.

Look Beyond the Purchase Price

When evaluating a property, the first question shouldn't simply be, "How cheap can I buy it?"

A better question is:

"What will this property actually cost me after I own it?"

That means looking beyond the asking price and considering the condition of the roof, HVAC system, plumbing, electrical system, foundation, windows, appliances and other major components.

A $250,000 house needing $75,000 worth of immediate work may not be a better opportunity than a $300,000 house that's already in good condition.

The numbers have to make sense.

Investors Need to Look at the Entire Deal

For investors, this becomes even more important.

A low purchase price can look fantastic until you calculate rehabilitation expenses, carrying costs, financing costs, insurance, taxes, utilities and the possibility of unexpected repairs.

If it's a rental property, you also need to consider realistic rent, vacancy, maintenance, property management and long-term capital expenses.

If it's a fix-and-flip, the after-repair value (ARV) matters tremendously. You need a realistic idea of what the property could sell for after the work is completed—not simply what you hope it will sell for.

The profit is in the numbers, not the asking price.

Location Still Matters

You can renovate a kitchen. You can replace flooring. You can install a new roof.

You can't renovate the location.

A deeply discounted house may be inexpensive for a reason. Before buying, consider neighborhood trends, comparable sales, surrounding property conditions, access to employment and services, and the property's potential resale market.

Sometimes paying more for the right property in the right location can produce a better long-term result than buying the cheapest property available.

The Same Principle Applies to Homebuyers

This isn't just an investor issue.

If you're purchasing your primary residence, that inexpensive fixer-upper may look like your opportunity to get into the market. And sometimes it absolutely can be.

But you need to know what you're getting into.

If the home needs significant repairs shortly after closing, will you have enough money left to handle them? Could those expenses put pressure on your monthly budget?

That's why inspections and appropriate due diligence can be so important.

Price Is Only One Part of Value

I've worked with buyers and investors long enough to know that the cheapest property isn't automatically the best deal—and the more expensive property isn't automatically the worst deal.

Every property needs to be evaluated individually.

Before you get excited about that bargain-priced house, let's look at the comparable sales, condition, potential repairs, resale possibilities and overall numbers.

Look beyond the price. Know the true value.

Thinking about purchasing a home or investment property in the Tucson Metro area? Let's talk about what you're considering and determine whether the numbers make sense.

Wes Stolsek

OMNI Homes International

520-404-9773

www.wesleystolsek.com