Are you an avid fan of HGTV? Does the season of spring cleaning elicit more excitement than annoyance? Forget Disneyland, is Home Depot the happiest place on earth for you?
If so, then you are likely a do-it-yourselfer. You have that innate knack for spotting a diamond in the rough. You see potential in everything and anything, as each object or opportunity you encounter becomes a canvas for your inner artist and craftsman. Always making this or doing that, there’s no project that doesn’t intimidate you.
When that inevitable time comes for you to invest in a new home, the temptation to buy a “fixer-upper” is remarkably strong. It may seem like a dream come true to transform an old, dilapidated domicile into your own humble abode, but is it a good idea for you? How do you know?
We know a thing or two about buying and selling all types of property, from big to small, brand new to barely standing. Therefore, we thought we’d lend a little seasoned advice to help you decide whether or not buying a fixer-upper is good idea for you.
While it may seem like a no-brainer when it comes to fixer-uppers, there’s a lot more to it than meets the eye. Before committing to a project as big as this, here are a few things you should know.
You Have to do a Little Math and Research
Investing in a home that requires a substantial amount of renovation and remodeling also requires additional funds to pay for said extras. Before you buy a fixer-upper, it’s a smart idea to first break down the mathematics and financial formula to ensure you’ll actually be saving money by doing most of the work yourself.
Begin by assessing the property and calculating the total expected expenses that it will cost to renovate and rework your potential new home. This not only includes materials but also labor, both your own and any additional required help. Then, subtract from that the expected market value of the property once you complete the project. You can roughly determine this value by researching comparable homes recently sold in the neighborhood.
Finally, subtract approximately 5% to 10% for wiggle room – any extras or unexpected expenses that might emerge during your work and to account for potential inflation. The final number is what you should likely initially pay to purchase the home and how it’s value will compare with buying a more move-in ready property.
Know When to Say No
Homes and properties that are considered “fixer-uppers” are a dime a dozen. Nearly every estate has the potential to be great, but you have to be smart about which ones are sound investments and which ones are not.
The best Realtor or real estate agent will recommend avoiding homes that require major structural renovations, including plumbing or electrical system overhauls, foundation work, and major roof and wall repairs. Unfortunately, making these types of repairs often doesn’t improve the home’s value enough to compensate for their large expense.
The ideal fixer-upper is one that requires mostly cosmetic upgrades, from new paint to drywall refinishes to new floor installations. These types of improvements, in general, cost much less than their structural counterparts and often improve the value of a home.
Get Ready to Get Dirty
The most cost-effective way to ensure your fixer-upper is a good buy is to do some of the work yourself. By choosing to purchase a home in need of major repair, you are automatically agreeing to put in more effort than the standard home buyer.
This includes labor both mental and physical. Know yourself and make sure you are a hands-on type of person capable of putting in some elbow grease prior to purchasing a fixer-upper.
Have Enough Money on Hand
Besides requiring extra effort, a fixer-upper also requires extra cash. From structural improvements to cosmetic upgrades, more money is needed to finance the improvement efforts of an unfinished home.
Look into available funding options that match the scope of your project. Small-scale renovations can often be covered by credit cards, while larger ventures often require a renovation loan, typically obtained through a mortgage or home line of credit. No matter the particulars, every fixer-upper will require more money than a move-in-ready home.
So if you’ve got the brains, the brawn, and the bucks for a fixer-upper, then by all means, invest away! Turning a tired house into a happy home can be one of the most rewarding endeavors a person can pursue. Now all you’ll need to do is find properties near you and start hiring real estate agents to find your next home.