The reason for this is to determine whether it is worth while monetarily to do any minor or major improvements. once you have made this determination, if you are trying to buy the property, you may then move forward with your offer to purchase based on what you may receive for the property less commissions, closing costs (of both buying and selling), improvements you have decided on, carrying costs, purchase price, existing mortgage balances, and some sort of target profit (cash out) figure. if you already own the property involved, you simply replace the purchase price with your target cash out figure.

If your determination leads you to believe that more than limited cleanup and paint is necessary in order to sell the property, then you should strive to put as little as possible in for the most return. In most cases it is likely that financing these renovations with a home equity loan or line of credit is the best way to go. If you are doing considerable rehabilitation, a homeowner’s line of credit is good because you can draw on it as needed for various projects as you go along. If three weeks into your project you have not yet spent a great deal of money, then you are not paying interest on money you have not yet used.

 

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