This is my first post on the forums so if it sounds like I am dumb and inexperienced thats probably true. I did search around and try to find a similar topic but maybe I am looking in the wrong places, if so I appologize for the duplications. Now down to my question. I have a friend who is in the construction business who recently purchased a house at an auction I believe for something around 30 (its was a piece when he bought it but he has quickly fixed it up to look quite nice). However, this came with the stipulation that he live in it for at least 2 years and of course had to get residency permits which required quite a bit of work. I am just out of college and looking to buy a house but I dont have all that much to sink into a house that I cant even live in yet. How much equity can I gain by simply doing some improvements on my own such as painting cleaning maybe new gutters etc? Has anyone heard of these kinds of ventures and if so where would you suggest I start? Like I said sorry if I am way too green but this seemed like a reasonable place to get some straight info for free. Thanks in advance

I can shed some light on the financing side and what I typically see from increased appraised value for home improvements.

Financing side has several options. If your credit is unestablished you may be able to get a FHA 203k loan to rehab a property. You would own and have the repairs done in 1 loan at a great interest rate.

If your credit is good then I would suggest stering away from a rehab and buying then renovating with cash you save up. If you cannot save enough to cover the repairs then go for rehab and there may be better options than 203k.

After you get your first house you have equity and many more options for future purchases. Some pull equity out through a refinance to 80% to establish capital/reserves to use in the future.

As for appraisals. Many agents in here probably do appraisals too. From what I have seen in the my 8 years from repeat borrowers is that if you replace something that was there and not broken the value increase is very limited for appraisal purpose but would obviously be more attractive in most cases (modernising)to a buyer. You may get return on the investment equal to yours or greater. Depends on the area and how much you paid and what you did. Pay someone else = labor and sweat does not increase value. Unless it is Lebron James sweat :-) Ya I am 15 mins from him.

If you increase square footage then you add to the home. Depending on what you build you can add less or more value. It is all an appraisers opinion and very heavily based on the comparable properties in the area. Some buy cheap materials and make a buck early and regret it in repairs later or some do the opposite.

Pay close attention to agents when they post financing information. They know what types of homes they struggle with in an area and more about the housing market. If you are an investor then you may want to pay more attention to what it will sell for and not what it will appraise for. They often run hand in hand but sometimes appraisals are way off and too aggressive. Unrealistic for your deveopement or street.

Thanks a lot. Obviously I still have a TON more research to do. I do have a couple of contacts who are RE agents so I am sure they can help put me on the right path with the stuff you mentioned like the appraisals and 203k. Thanks again!

203k is oftly nice, but around here, 95% of loan officers dont know how to do it or dont want to.

So spend some good time searching for someone who actualy might know what they are doing.

find some one who specializes working with first time buyer's. They can point you in the right direction and get you on the path to getting where you want to be.