Things to Consider Before Buying a Fixer-Upper Home
Buying a house that is in less-than-perfect condition and then fixing it up can be done for profit, or as a way to purchase that dream home for far less than could normally be afforded. Either way, there are several issues that must be considered before signing on the dotted line.
Unlike purchasing a home that can be moved into immediately, a fixer-upper will require more than just figuring if the monthly mortgage payment can be made.
*Inspect it – While any home should be inspected prior to making an offer, the fixer-upper home should be looked at with an eye toward estimating how much the repairs will cost. Make sure to include materials and labor, and remember to include extra in your budget for unforeseen events.
*The offer – Take the improvement estimate and subtract it from the home’s likely market value based on renovations and real estate values in the neighborhood. Knock off another 5%-10% for improvements that will be made along the way.
If It Is Broke, Consider Fixing It
Knowing the extent of the repairs is important, but so is whether they are within the skill set of the new owners or if someone else will have to be hired to perform them. If a professional is hired, that will make the renovations more expensive.
*Basic repairs – Some of these can be performed by those with little experience. Examples include painting, stripping wall paper and patching walls; refinishing floors or laying carpet and tile; changing doors; and installing ceiling fans or light fixtures. There are many books and online sources that can help someone with basic home repairs. Some of the larger home improvement stores also offer one-day classes for free.
*Harder repairs – More experience will be necessary for repairs such as replacing heating and air conditioning systems; replacing electrical wiring; and complete kitchen or bathroom remodels.
*Completely avoid – Most real estate experts recommend completely avoiding any home that has significant structural problems. These can be very expensive, often go unnoticed by others because they are internal and rarely add enough value to the home to offset the cost. These include complete electrical and plumbing overhauls, foundation upgrades and extensive roof and wall work.
Other Fixer-Upper Considerations
As with any home, there are other issues that should always be considered.
*Location – The old axiom about location being most important goes double for fixer-upper homes. The best advice is, as the saying goes, to find the worst house on the best street. Look in neighborhoods that are up and coming.
*Surprises – No matter how well thought out the plan, there’s bound to be surprises. Often, when one thing gets torn down or fixed, it will reveal another problem. Understand this going in to the project.
Few people can look past the rundown outward appearance of a house and see the potential. For those that can, and are willing to put in the hard work, it can be a very rewarding experience. Buying a fixer-upper will either prove to be a wise investment or a financial nightmare, so it is prudent to do proper research before taking on such a project.