As a contractor and home renovator, I have spent a lot of years fixing up other peoples' properties. I've always found it rather satisfying to transform the eyesore into the aesthetically pleasing, and I was content with doing "a day's work for a day's pay." This philosophy is not necessarily wrong, but it's not particularly lucrative either. I realized that my customers were actually the ones reaping the most rewards from my labors.
A Project
One case in point that really opened my eyes was a job I did a few years back for a customer in suburban NJ. This customer wanted to buy a particular home, and consulted me as to the extent of work that would be required before the house was purchased. The customer used my estimates (worst case scenarios) to negotiate a purchase price that was significantly discounted. The purchase price was $270,000. Other homes in the area (livable, but not recently updated), were selling for around $300,000.
After the customer bought the house, I was hired to complete some rather extensive work on the home. The renovations included were as follows: three remodeled bathrooms, a remodeled kitchen, the installation of new windows in the entire house, the building of a custom ceramic tile sun porch, all new interior and exterior doors, and a complete re-painting of the homes' interior.
A job of this size kept my workers and I busy for four solid months, so we were quite pleased and figured we were doing pretty well.
But when we started to look more closely at the numbers and time spent (figures that have since plagued me over the years), we realized that our customer was reaping a whole lot more of the benefits of our labor than we were.
The Breakdown
1. The work had cost the homeowner approximately $90,000: about $55,000 labor, and $35,000. in materials.
2. Four months after completion of the work, (which was 8 months after the original purchase), the homeowner listed the house for sale.
3. The asking price was $580,000., and we got a good laugh over "how unrealistic" (in our estimation) this price was.
4. After being listed for around 60 days, the homeowner got an offer for $520,000. They negotiated for a few weeks, and eventually settled on $528,000.
The Clincher
Eleven months, and 3 weeks after the original purchase of the property, the owners re-sold it. The original purchase price: $270,000. The amount for the remodel (labor and materials): $90,000. The total invested in the house: $360,000.
* Price the house sold for one year after purchase: $528,000. * Subtract total cost of house – $360,000. Homeowner's net profit in one year $168,000.
An Eye Opener
Bottom line: we did all the work, (and yes, received our wages ), but we added value to a project that far exceeded our profit.
Our profit for increasing the value of the house by $258,000 was only $55,000; materials were $35,000. The home owner's profit for simply buying the house, and hiring us was $168,000. If this had been our own project, we would have made $223,000 for the same 4-month work period.
This may seem like an exaggerated example, and you may be working in a much less expensive housing market. Still, taking into account the regional variation in price points, the percentages are the same. Even if the value you add is double, those numbers are nothing to sneeze at. If you're going to make $20,000 on a rehab, then maybe you can make $40,000 or $50,000 doing it yourself. Or, looking at it another way, work half the time for the same money. Either way, it pays to know the numbers.
About the Author: Bob Kmosko has been a full time contractor /re-habber/ investor for over 25 years. His company, TK Homes, is focused on providing discounted wholesale properties to contractors and investors. If you are currently in the market for a wholesale property, or are considering purchasing one the in the future, log on to http://TKHomes.net and let us know what you need!
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When you own a home, you think of how you can maintain it. This is, after all, an investment you make. It is only smart and practical that you do whatever it takes to maintain it.
That is why there are home improvement loans that you can make the most out of. But how do you know which one is the best. There are so many opportunities there that all end up claiming to be the best home improvement loan.
However, once the whole hoopla faded and youve already signed on board, you realized that it was not what you expected it to be.
So you have to regain whatever youve lost. This is a challenge for you indeed. You dont need to be overwhelmed.
Just take the time to compare one home improvement loan with the other in order for you to know which one you should get into.
The first thing you should know is the type of home improvement loan available. In order for you to get the best home improvement loan, you need to know the kinds out there.
You have to determine which one works for you and whether it is appropriate for your lifestyle or not. Then the next question is whether you can afford to pay for it in the long run.
Know that if you let the bills mount high, you will have a higher mortgage rate and the home improvement loan that you originally intended to take advantage of might result to foreclosure if you cant pay for your home all in all.
We suggest that you look into the funding factors. The best home improvement loan knows that the large purchase is very essential.
This is why when youre contacting lenders, you need to be aware of the current home equity loan and whether this is the best one for your budget within your state.
The rates of the home improvement loan also vary by state. Check with HELOC if ever there is a way to make the rate flexible and be right for your budget and your preference.
Finally always think of your credit. You need to have good credit before and after you opt for the best home improvement loan that youve decided to sign up for. In that case, you are able to keep a clean name and this will help in the future.
If otherwise, you will have a harder time applying for other loans. It is always smart to be reputable whenever it comes to any kind of bank transactions.
For those people who have owned their home for while, they’ll have a certain amount of equity built up, and they can actually get a home improvement loan to improve their living conditions. Whether it’s a complete remodel job, or a simple repair or improvement job, there are home loans available that usually charge a small amount of interest in order for you to improve your property.
Home improvement loans are actually rather interesting, the banks are betting that the actual market value of the home is going to increase through a home improvement loan. You’ll need to explain to the banks exactly how you’re going to use the money and how it’s going to increase the value of the home, but often times, you can get an inexpensive home loan on top of your regular mortgage to improve your home’s market value.
Many people use home improvement loans to do structural repair. This means that you can get a home improvement loan to improve the foundation under your home, repair the roof, repair plumbing or wiring, or even to work on driveways. It’s important that you understand how a home improvement loan works and the interest charged in order to make sure that you can pay for it. Your home is usually used as collateral on a home improvement loan, so going in over your head on improving your home, can actually put you in danger of foreclosure if you can’t afford the loan.
Make sure you thoroughly understand how your home improvement loan is going to work with your mortgage. You’ll need to understand contract terms, interest rates, and of course foreclosure terms as well. You’ll need to add in all of the maintenance or home loan costs into your improvement loan in order to make sure that you can make the payments on the home and all of its accompanying loans. It might be nice to totally remodel your kitchen, but if you can’t afford the home improvement loan, you could actually lose your home over it.
There are companies that specialize in home improvement loans, it’s important that you thoroughly research any financial company and its accompanying contract. You can use your Internet to not only research the financial companies, but also to apply for home improvement loans. Many financial companies have moved online, the low overhead can actually allow them to charge less interest, so before signing for your home improvement loan, make sure you’ve done your shopping.
A home improvement loan is a great way to improve or repair your home. Make sure that the increase in total home loan costs including your home improvement loan are going to be offset by increasing your market value in your property.
By: Marlon Dirk
About the Author:
This site will give you different kind of information on Loaning. The basic ideas about home equity loan, Also, you can find it here broad articles about residential loans and home improvement loans. Aside from loan articles about your house, you can also check out on used car loan, purchase loan, secured loans and interest loans.
