Many handy individuals seeking to start a business, choose to go into home renovation. This involves buying abandoned and divested homes and restoring them to sell for a profit. Given the freedom of working for themselves and on a flexible schedule, many find this business very rewarding. As rewarding as it may be, there can be many unforeseen pitfalls of going into this type of business that include financial expenditures as well as time constraints that can put your business in foreclosure. Here are a few costs to consider.
Assess your costs
So you’ve just purchased the ideal “handyman’s special” and want to begin working on it. There’s only one problem. You have no idea where to begin. Before purchasing a home that you are looking to renovate, you should get an assessment or inspection of the house and what its issues are. This allows you to fully assess all of the issues and determine whether it is worth fixing. You don’t know if your house needs new wall insulation or maybe the issue has something related to I Beams.
Many times, homes can be too costly to fix up or beyond repair. Other times, you may just not be skilled enough to fix all of the repairs yourself and it may cost you more to contract out the repair than the house is worth. Finding out what can be done, before putting any money down can save you a lot of time and money.
Consider the Time
Think of your house as an investment. It may take you a while before you see any money coming in from this investment, so its important to consider your time restraints. The harder you work on the house, the sooner it can be available for sale. If you are planning to receive a large profit from your work, you may be able to wait longer. However, if you need the money in a short period of time, you will have to work harder to meet that time limit. Renovations projects can take years to complete, so if you are not willing to invest a long period of time into it before you see any profit, you may need to reconsider your options.
Consider the Cost
What may the most important aspect of starting a home renovation business is, money. You will need to manage your money very carefully in this business to avoid spending more than the house is worth. The less you can get the house for, the more money you can use to restore the home to make a profit. Purchasing a home for $80,000 does not leave much room for profit, considering the costs, when you are selling the house for $100,000.
Financing a home that you are looking to repair may not always be the best option. This can increase your costs drastically. Not only do you have to factor in the cost of demolition and debris removal, material, labor, taxes and the base price of the home, you will also have add the cost of interest into the mix. Many times, home renovators are not able to balance these costs and end up foreclosing on a home that they are financing. What starts as an endeavor to make money can cost them, not only the existing capital that they already have but a ruined credit, to boot.
Before going into the home renovation business, think carefully about the capital you have to invest. Many times people forget that it is an investment which could take years to reap any profit. Factors such as upfront expenses along with time costs are things to consider before jumping in.