Many would-be homeowners are enticed by the notion of the fixer-upper.
Getting a home at a bargain price, investing the sweat equity in bringing it up to snuff, and then using it as their home or to flip at a considerable profit seems like a swell idea. But before tackling such a major investment and commitment consider: Is a fixer-upper right for you?
Before considering a fixer-upper, you (and your partner) need to ask some hard questions. For one, do you enjoy home improvement projects? Do you have the skills necessary to tackle what’s needed to bring the home up to snuff? If not, are there family members or friends who are willing to lend a hand?
You also need to be comfortable living in a state of flux. Are you ok dodging tools and work areas to get the laundry done or dinner cooked at the end of a long day? If you are comfortable with a little chaos, then a fixer-upper might work for you.
Know Where Costs Are
A good home inspector is essential to buying any home. You want to be sure you’re fully aware of what you’re buying. There are certain systems that can add considerable cost to a fixer-upper project, including:
- Sewage and septic;
- Heating, ventilation, and air conditioning;
- Roofing. Most roofs have a 20- to 30-year replacement cycle;
- Furnace. Furnaces also have a 20- to 30-year replacement cycle.
In addition to the replacement costs associated with these systems and structures, you’ll also need the tools to complete that work. In many cases, the tools are specialized and can increase your budget for these one-time uses.
If you’re ready and willing to purchase a fixer-upper, here are a few tips to consider for choosing the right house that will allow you to maximize your investment and peace of mind:
- Look at Purchase Price. The price you pay for your fixer-upper should be well below the cost of other homes in the neighborhood. You want the purchase price plus the costs estimated to renovate the property to equal a resale price that is the same as (if not slightly higher than) comparable neighborhood prices.
- Pick a Home with ‘Good Bones.’ Structure is important when choosing a fixer-upper. You want to be sure that the home’s foundation and building materials are quality. Otherwise, you may be sinking lots of renovation money into a home that is not worth it.
- Choose Cosmetic Improvements. There’s something to be said for keeping it simple. In some cases, all you need to do is find a home that requires some fresh paint, new carpeting, and better landscaping. These aesthetic improvements can help add inexpensive touches that allow for livable and sellable conditions.
- Find a Financial Partner. You want to find a financial partner who can help you with the funds you need to make the fixer-upper into a great property. Your lending partner should work you to understand your dreams and wishes and create the right financial package to get you to work fast.
If you’re ready to get started with your fixer-upper project, answer a few questions here, and a home lending expert will contact you.