1. Do an analysis of how much $/sqft homes were going for in the area where you purchase the investment property. I performed an analysis on two scenarios; fixing up what was there at the current square footage or adding square footage. The data showed that the sweet spot for getting the most return on the investment was to increased the sqft to around 2000 sqft. The numbers revealed that even though the cost was higher to add square footage, doing so would nearly double my return.
2. Seek a renovation loan for your budget plus contingency. The lender will want to know your contractor, the detailed drawings for the renovation in addition to your credit history and your ability to pay the loan if the investment goes south. That being said you will need to get an architect to draw your plans as soon as possible after you purchase. Bake in contingency cost! Termite damage is VERY common here. Plan on it.. If you update more than 50% of the property you must update anything and everything else not up to code. For example, old knob and tube wiring must be updated. Don't forget landscaping in the budget!
**As an aside, if you need a loan to buy the property at the auction, I would shop a few lenders to see if anyone will do a drive by appraisal and can close in less than 30 days. There are lenders have programs that give you the money to buy the property and fix it up in one loan package. Take caution in this method, because if the loan does not close, you chance losing your deposit if you don't pay the balance in 30 days**
3. Bake in the cost of sale. Closing cost are usually around 6%, plus expenses like property insurance, electricity and water. You need to have that turned on for home inspections. Also home warranty cost (if you chose to provide). Know your estimated net profit? This way you know your wiggle room in case you go over budget.
That's all for now. I hope this was helpful. When you are ready to sell call 504-517-MAYA and as always email me for questions.
Insurance - Big piece about insurance - you need to consider the end buyer cost not just yours.