When is Purchasing a Fixer-Upper Home Worth the Cost?
There are several good reasons why property buyers like purchasing a fixer-upper, especially people who have been around the block a few times and who know how to make every dollar invested work for them. With a fixer-upper you typically pay less for a home which means you often have built in equity, even after making necessary updates and/or repairs. Fixer-uppers can be pure gold for consumers who are not afraid to roll up their sleeves and take on whatever is necessary to get the home in livable shape. For some, it is a good way to get your dream home at a fraction of the price the home would normally cost. For others, it is an opportunity to make a quick profit.
However, it does bear reminding that not all fixer-uppers are a great opportunity. It is important to be able to recognize a fixer-upper and to determine whether it is worth the investment versus buying a money pit that is not worth your time, effort, and resources.
So, what do buyers need to keep in their mind before they pull the trigger and think about purchasing a fixer-upper property?
When looking into a potential fixer-upper, buyers should be extremely careful about the financial side of purchasing the property. Often, a fixer upper will be more affordable than a similar home that can be lived in immediately. However, with a fixer-upper, there are often many additional costs so you need to be smart and plan out your finances in detail.
For example, you will need to determine what the value of the property will be when it is completely restored and fixed up. This is a key figure to know because it will be the trigger on your go vs. no-go decision. When you determine this value (working with an experienced agent will help tremendously here), a review of the asking price and your estimate on repairs/renovations, will quickly show you if there is value in this home purchase.
If the number is too low and it feels that you will not be able to fix up your property with this sum, then it makes very little sense to purchase such a fixer-upper. The numbers just do not add up. Of course, there are additional considerations to be kept in mind, but if you are unsure that the difference between the potential value and the price tag is not enough for your fixing up efforts, it is probably best to avoid the project.
Consider the Job
No doubt about it, restoring a fixer-upper home will most likely become a job. Often times one that takes several weeks to complete. It is essential that you determine what kind of work needs to be done upfront so that you will be able to conclude whether this is a project that makes financial sense. No one wants to take on more than they can handle, both physically or monetarily.
One of the first things to consider is the structural soundness of the property. If you are not sure that you have the skills to make this assessment, contact professionals and see what they have to say about the home. Some construction companies will offer this kind of service and you can typically find specialized businesses that do this type of work. The reason why this is the first thing to check is that doing work on the actual structure of the property can be incredibly expensive. If you find issues with the structure, proceed cautiously. In many instances it is best to avoid these deals.
The next things to check are the electrical and plumbing fixtures and systems. Many older homes can have significant issues with these two aspects and once again, you could be looking at renovations that could be quite a financial drain. That is especially true if a complete overhaul of the pipes or replacing the electrical system is required. If you need to do something of that magnitude, you need to do your homework to determine if the investment is worthwhile.
The same can be said of the roof. While repairs can often help you get several more years out of it, you may find repairs alone cannot resolve the issue. When the latter is the case, you are potentially looking at several thousand dollars for a new roof. If you are not prepared for that type of effort, it can push you way over budget. Knowing what you are dealing with at the outset will help you decide if this is a project you want to undertake.
In addition, you need to check the state of individual rooms, especially the bathrooms and the kitchen. Remodeling these rooms can be a benign task or a major undertaking. Sometimes, you will be able to take on partial remodels and freshening up of the rooms. Other times you will be faced with more significant issues and time consuming updates. While not typically show-stoppers, you will need to assess your financial standing and ensure you have both the resources and time to get the changes made in the time-frame you have allotted.
Finally, it makes good sense to check other features of the property, such as the overall paint scheme, fixtures such as doors and windows, and even the landscaping. Painting is not too costly and is a great way to turn a dull house into a warm and inviting home. If you are not sure about the fixtures and their potential, hiring professional locksmith services or fixture specialists will provide the information you need. For landscaping, either tackle it yourself or hire out to spruce up the grounds and get the home looking its best.
Special Fixer-Upper Considerations
Now that you have determined the condition of the potential fixer-upper is, it is time to look at other considerations that might influence your decision. The most important of this is the location of the property. For instance, if it is a property that needs serious work done but is located in a very good neighborhood where property values are expected to rise, you might still want to take on the updates because the house might increase in value in the future.
Also, you need to keep in mind that surprises are always a part of the renovation process, no matter how minor or extensive they are. If you determine that the numbers add up, and if you are close to the decision to purchase and fix up a certain property, you should always consider the possibility that you might discover new issues which will translate into new expenses. Always give yourself some breathing space with your finances.
Parting Fixer-Upper Information
In short, deciding to go with a fixer-upper is a very difficult decision and one that must never be made lightly and without considering all your options. If you are not sure about certain aspects of the project or the state of the potential fixer-upper, talk to professionals and see what they have to say. They might be of huge help.
However, keep in mind there are not many things as satisfying as finding the perfect fixer-upper. Whether you decide to live in the house or sell it for profit, chances are you already have equity in the property that you might not otherwise have had. If purchasing a fixer-upper property makes sense for you, contact an agent to assist, and let the search begin!