An HGTV star who's invested in over 100 properties explains how to tell if a fixer-upper is a great deal - or a money pit
Malcolm Taylor/Getty Images
But it can be tricky to tell if a property is worth the investment or will end up costing more than it's worth.
To figure out if a fixer-upper is a good deal, Scott McGillivray, the host of HGTV's "Income Property" and a real estate expert who's invested in over 100 properties, recommends figuring out how much the property would be worth post-renovations and comparing that to the sale prices of other similarly sized homes in the area.
"You have to determine what the after-repair value of your home is going to be," McGillivray told Business Insider. "Looking at similar homes that have sold that are in good condition, what are they selling for? What is the actual fixed-up value of that home?"
McGillivray shares an example: If you score a home for $200,000 and comparable properties in the area are going for $300,000, you need to invest less than $100,000 in renovations or you're over-paying.
"Ideally, I would try to make sure there's a really significant margin, like $50,000-plus, that's going to give me equity there," he said.
McGillivray says that choosing a fixer-upper over a more updated home is a "win-win" for two reasons: You get to customize it to your exact taste and you're building equity it, and thus into your portfolio.
Fellow HGTV stars Chip and Joanna Gaines of "Fixer Upper" also know a thing or two about updating less-than-perfect homes. For the Gaines, choosing the right property to flip comes down to one question: "Is this asset going to depreciate in value?"
If that's a yes, it's probably not worth your time. "In the housing universe, if you're confident or nearly positive that these assets are going to appreciate in value, it's a no-brainer to buy," Chip previously told Business Insider. "If you get into complicated markets to where you're not confident, rent for a season, or rent for a year or two, and let the market sort of calm itself down before you jump in with both feet."
- I got a $40K raise using this 30-second strategy. It made me realize loud work, not hard work, always wins.
- Qatar Airways' new CEO explains why it's sticking with the Airbus A380 as other airlines retire the costly superjumbo
- Prince Harry and Meghan found out about Kate Middleton's cancer diagnosis on TV like everyone else, report says
- Sustainable Event Planning
- Ambani, Adani collaborate: RIL picks 26% stake in Adani Power project
- As back-to-office avatars turn casual, comfy sneaker sales pick up pace
- Fresh photographs of Milky Way’s black hole Sgr A* reveal strong, twisted magnetic field similar to M87*
- 8 Lesser-known places to explore in Himachal Pradesh