When Is a Home Not Worth Keeping as an Investment

If you’ve inherited a house or if you have an old rental property, you may be wondering if it’s worth keeping so it’s important to know When Is a Home Not Worth Keeping as an Investment.

Under the right conditions, a property can be incredibly valuable for you.

If it’s your primary residence, you and your family can enjoy the property and the neighborhood – and if the property’s paid off, you can save money by not making mortgage payments.

And if you decide to manage it as a rental property, you can generate significant cash flow and make a monthly profit.

That said, houses can be a lot of work.

If you have a lot of cleanup to do, or if the home is in need of major repairs, you may wonder if it’s worth keeping at all.

So what are your options and how can you tell if your home is more trouble than it’s worth?

When Is a Home Not Worth Keeping as an Investment - image of a couple meeting with their accountant

Options for the Home

First, it pays to understand what your options for the home are.

Typically, you can:

        Live in the home

  • If you want to keep the home, you can live in it as your primary residence. This is especially advantageous if you fully own the home and you don’t want to make a regular mortgage payment.

        Rent the home

  • If you’re hoping to keep the home for a long period of time, one of your best options is renting. If you fix up the home and market it well, you should be able to find a tenant willing to pay you significant monthly rent.

        Sell on the open market

  • If you want to get rid of the house and make as much money as possible, you should consider selling on the open market. The trouble here is that this is usually a long and time-consuming process; you’ll need to make repairs, clean the home professionally, and wait for an interested buyer to come along with the right qualifications.

        Sell to a cash buyer

  • If your house is more trouble than it’s worth, one of your best options is to sell to a cash buyer. These types of buyers specialize in buying unwanted properties from eager sellers with an all-cash offer. You may not fetch a purchase price as high as what you’d get on the open market, but you won’t have to make any repairs or changes to the home – and the transaction will close much faster.

Variables to Consider

High-level, there are a handful of variables you’ll need to keep in mind when evaluating your home:

        Money

  • How much are you willing to spend on this project? Selling or renting the home can net you a profit, but if you spend too much on repairs in the process of getting it ready, your entire profitability could be compromised.

        Time

  • What are your personal time constraints and how much time are you willing to invest in this property? Moreover, how long can you afford to deal with this property – is this something that can hang over your head for years to come?

        Stress

  • Don’t underestimate the effects that stress can have on your mental and physical health. If your home renovation or sale process is too stressful, it can wreak havoc on the rest of your life.

With that in mind, you’ll want to evaluate your situation in terms of:

        Distance

  • How far is this house from you? If it’s in your neighborhood, stopping by to make repairs and manage the property is no big deal. If it’s across the country, it’s probably not worth the hassle.

        Repairs needed

  • In what condition is this house? Does it need to have any major repairs before someone can reasonably live in it? Or is it ready to go? Most homes will need to undergo at least some minor repairs before they’re listed for sale or advertised to tenants – but if you’re not willing to pay for or manage those projects, they may not be worth it.

        Cleaning needed

  • In some cases, homes can be in such dire need of deep cleaning that it would take weeks or thousands of dollars to get them in proper shape. This is especially true of hoarder homes.

        Time demands

  • How much time do you have to dedicate to a project like this? How fast do you need the home to sell?

        Personal care/sentiment

  • Finally, think about your personal disposition? Do you like the idea of fixing up a home, or does it fill you with stress and dread?

It’s hard to concretely define the variables that make a home more trouble than it’s worth because that line is different for everyone (based on their preferences and personal priorities).

Think carefully about the nature of your property and your personal disposition before making your final decision. 

 

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