If you have been reading Thinking Outside The Sandbox: Family for awhile you probably remember when I bought the #totsreno house just over 2 years ago. As a quick refresher, my husband and I moved closer to our families after living over 18 hours away. When we first moved to southern Ontario we were living in my mom’s basement. My husband was not working and I was about to have our daughter. Finally after two years of hard work and saving we were in a position to buy a house. Our budget was small but we were very excited to move out of my mother’s house.
We found a fixer-upper that was in a rural location. It was bank owned and we bought it for a great deal. Just over 2 years later (and a ton of work) we are selling the #totsreno home and stand to make a 100% profit – we have almost tripled the value of the home. With our second round of home purchasing, we have approached home buying differently.
How To Buy A Home To Make A Profit
Here are my best tips and tricks on how to buy a home to make a profit – just like we did. How To Buy A Home To Make A Profit.
Know Your Area
Before you even go out and look for a property take a look on MLS and see what is out there and how much houses in your area cost. Drive around and see the houses from the outside (or use Google Maps like I do) and attend some open houses.
Know Your Numbers
Before you meet with an agent or put in an offer make an appointment with a mortgage broker. It is very important that you know your numbers. Ask for a pre-approval and tell the mortgage broker exactly what you are looking for. Do you plan on buying a home and selling it in a few years to upgrade? Do you want to rent out the home? Are you looking for a forever home? I recommend a broker and not a bank because they will be able to look at the terms of a lot of companies/plans to find the best one for your situation. Breaking a mortgage in the middle of the term is very costly.
Find A Good Real Estate Agent
I read a lot of advice that suggests you buy a home on your own and not with an agent. I do not agree with this advice for one reason – I am not a real estate expert. There are many things that I will DIY but when we are talking hundreds of thousands of dollars I go to the professional. An agent will be able to help you find what sort of home you are looking for. They will also help with many of the legalities (terms and conditions) and all of the negotiating that come with home buying. I like to think of my real estate agent as my employee. They are working for me in my best interests.
To find a good agent ask friends/families/coworkers who they have worked with and recommend. Stop by some open houses and see if their personality matches yours. It is ok (and expected) to interview agents before your hire them and sign a contract. Ask how they like to communicate and how long have they been an agent for. If you do not ‘vibe’ with someone keep on looking.
Know Your Skills
In order to make a profit on a home – generally speaking – you will have to put in some sweat equity. This tip can be tricky because not everyone is super handy. Figure out what you are comfortable doing on your own and what you will need to hire out on. For the #totsreno house, we hired contractors to put on a new roof, install windows, replace the furnace and install central air and drywall the ceilings. We did all the painting, installed flooring, replaced electrical outlets/lighting, opened up a non-load bearing wall, redid the sun porch and many more projects. By doing a lot of the work ourselves we were able to save on labor costs. Once you know your skills you will be able to evaluate the affordability of a home because you will already know your numbers.
Buying a home with the intention of making a profit is very different than buying a dream home. You need to be smart with your investment and do not buy something more than you can afford or the market can bear. It would not make sense to put in a top of the line kitchen in a home that could only sell for $200,000 because of its location. If you were to live in the home for 50 years … well, that is a different story.
We are now looking for a home which we can live in while we fix it up and rent it out in a few years. Our goal is to buy a cottage in 15 years with the proceeds of the rental. We are following the steps I have outlined above and will keep you up to date with our progress. This is how to buy a home to make a profit.
By thinking with your head and not your heart you can make a good profit and make your future dreams come true.
Happy house hunting.