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Rumson New Jersey’s Dennis Lynch Highlights Pitfalls to Avoid When Buying or Renovating a Property

Dennis Lynch is a real estate analyst based in Rumson, New Jersey. Over the years, Dennis has helped his clients achieve their real estate goals by leveraging many different investment strategies. His unique experience has also enabled him to identify potential pitfalls that could significantly reduce return on investment or even lead to a negative return.

This article shares tips and strategies from Dennis Lynch to avoid the pitfalls of buying and renovating in New Jersey’s tough real estate market.

Five Common Buying Pitfalls and How to Avoid Them

There are dozens of pitfalls to avoid when buying new real estate investors can meet daily in Rumson and throughout New Jersey. Below are five of the most common challenges.

Pitfall #1: Overpaying for your property

Perhaps the biggest mistake new investors make – whether they’re buying a first home or dipping their toes in the pool – is overpaying for a property. Dennis Lynch says it’s essential to let logic, not emotions, guide your purchasing decisions. Just because a property ticks all the emotional boxes – perfect location, great bones, ample space, energy-efficient features, etc. – that the property is perfect for you.

When emotions control the buying process, it’s easy to get caught up in a bidding war, even when the price is well above market value. Dennis says overpaying $50,000, $100,000 or more is not a logical approach. It may be difficult or impossible to recover financially. His advice is to realize that “the right house at the wrong price is the wrong house.”

Pitfall #2: Paying the right price, but ignoring budget constraints

Along the same lines, paying too much for real estate is not realistically considering your debt-to-income ratio. Even when you can buy a property at New Jersey fair market value or below, if your monthly payments are pushing your budget to its limits, it may not be the best choice for you.

According to Bankrate, an ideal debt-to-income ratio should not exceed 28%. When you factor in all the monthly bills – credit card debt, auto loans, revolving credit, utilities, insurance, etc. – the ratio should be less than 36%. If you have high-interest credit card debt, laddered student loan obligations, or other bills that eat up a large portion of your disposable income, paying off the debt before taking on another monthly bill will save you money. will help obtain better loan terms and structures.

Pitfall #3: Trying to do it all yourself to save money

Many new real estate investors are convinced that with little time and research, they can save money by doing everything themselves. They look for properties for sale by owner to avoid paying real estate commissions. Inexperienced buyers may choose to conduct home inspections and title searches themselves. Some write up their contracts to avoid paying legal fees.

While all of these tactics can lower the initial cost of buying a property, the potential risks could be devastating. A faulty contract may involve hiring a lawyer to settle disputes. The average hourly rate for an attorney in New Jersey is between $200 and $459 per hour, according to Clio. If you add in compensatory damages, court costs, and filing fees, even an accidental mistake could cost you thousands of dollars and years to settle.

As an experienced real estate market analyst who has seen many people fall into this pit, Dennis Lynch recommends every buyer rely on experts in drafting legal contracts, inspecting a property for security and code violations, surveying, title search, transaction negotiations and closing. By spending a little more upfront, you can avoid future problems that could cost you tens of thousands of dollars in the long run.

Pitfall #4: Not understanding local market trends

While some inexperienced home buyers don’t do enough research, others don’t do the right kind of research. For example, relying on national research and market statistics to inform decisions is a big mistake. National averages rarely reflect local market conditions. One of the main advantages of working with a licensed real estate broker is that these professionals have access to real-time changes in demand and inventory data. Even within the same city, selling prices and buyer preferences can be very different.

Avoiding trouble is often as simple as partnering with a real estate professional with deep local knowledge and an extensive network to spot emerging trends. These relationships also allow real estate agents quick access to information about properties that will soon be on the market but may not be widely advertised.

Pitfall #5: Not making a plan

Even though buying a home is often the most expensive purchase most people make in their lifetime, many people approach the process as casually as going to the big box store to fill up. of basic necessities. Before looking for a property on the market, creating a plan is essential. According to Denis Lynch, creating a plan by asking yourself several questions is an excellent strategy. Here are some questions your plan should answer.

  • Are you interested in a private home or commercial property?
  • Is this a short-term fix or a long-term investment buy?
  • Are you looking for an income-generating asset?
  • What type of property are you interested in – single family, HOA, retail, commercial, multi-family?
  • Will a mixed-use neighborhood serve your investment goals?
  • Do you have an exit strategy?

Once you know why you want to buy and what your short and long term goals are, you can start researching available inventory. This helps you save time by avoiding properties that don’t match your plans for the future.

Five common renovation pitfalls and how to avoid them

In addition to shopping challenges, people make several renovation mistakes. Here are five barriers to rehabilitation that homeowners face.

Renovation Problem #1: Not Following Code

Not getting the proper permits and scheduling inspections can seem like an easy fix. You can always apply for authorization retroactively, right? Not necessarily. In New Jersey, the fine for renovating without a permit can cost you $2,000 a day until a permit can be issued, and you may be forced to remove upgrades and start over.

It is essential to realize that any project carried out without the required permits and inspections could result in loss of insurance coverage and/or higher premiums in the future. Although some minor rehabilitation projects do not require a permit, it is strongly recommended that you visit your local zoning and permitting office before driving the first nail or altering structural components. Even if DYI is your plan, consulting a professional contractor may be in your best interest to avoid code violations and penalties.

Renovation problem #2: Overspending on unnecessary details

Adding high-end appliances and finishes to an older home is often a bad decision. Keeping designs to original specifications and repairing rather than replacing certain items will help you control the budget and could improve resale value and profit potential.

From a pro perspective, Lynch recommends starting with roof updates and other waterproofing projects that protect your investment. Then, depending on your budget, you can upgrade the property to make it more attractive to buyers.

Renovation problem #3: Not ordering enough supplies and materials

It may seem logical, especially when working on a tight budget, to order exactly what you need. However, things happen. Finding out you’re missing a dozen bricks can be a disaster. Exact color, size or texture may no longer be available.

Avoid this problem by ordering 10-15% more than you need. Any excess can be sold or returned for credit, and you avoid added stress and expense if something unexpected happens.

Renovation problem #4: Excessive improvement for market conditions

The vision of creating the best home on the block can be tempting. It sounds like you should be able to improve your profit margins if your remodeled home is better than anything the neighborhood has to offer. Don’t be fooled. Over-upgrading luxury items and features in a solid working-class neighborhood will not appeal to high-end spenders. Creating a welcoming and attractive aesthetic is a better approach.

Renovation Problem #5: Redefining curb appeal and period fundamentals

Curb appeal – the look behind the wheel – is the first thing a potential buyer will see. Negative upgrades – things that make the property stand out in unnerving ways – drive away qualified buyers. Avoid installing plastic windows and false facades that diminish the original design. Instead, opt for period details to enhance curb appeal.

Knowing how to avoid buying and remodeling pitfalls helps real estate investors achieve their financial goals. With over a decade of localization New Jersey Real Estate Experience, Dennis and Marshall Lynch can help you make better decisions based on your goals and aspirations.

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