Buying a fixer upper is a great way to score an unbeatable deal on a new home. But unless you have a lot of experience flipping houses, you have to be extra careful about making sure that you don’t get in over your head—or over your budget. While you certainly save money in the short term when you buy a fixer upper, there is a lot of expensive work that goes in to turning a not-so-great home into a valuable showstopper. And the time to figure out whether the fixer upper you’re interested in is worth the time, money, and effort it needs is before you put in your offer, not after.
The market for fixer uppers exists both concurrently to and separately from the standard real estate market. The rules are a little bit different when you’re dealing with homes that aren’t quite ready for move in, and in many cases, you have a lot more buying power than you would with a turn-key residence. Armed with a big imagination and a bit of realism, you can turn a small investment into a massive pay-off—you just have to make sure that you go into the process with as much information as possible. Below, we’ll go over the five things that you need to know in order to buy a fixer upper with some real investment potential.
Watch enough HGTV and you start to quickly learn a hard fact about buying fixer uppers: the wrong house in the right location can be a financial windfall. Many people want homes that will be ready for them on move-in day and have a hard time looking past outdated aesthetics and other cosmetic fixes. Be the one to put in that work and the payoff can be more than worth it.Picking a great location to buy a fixer upper requires some market know-how, but there are also some tell-tale signs that your fixer upper is situated to sell. Look at local market trends, as well as the strength of the local business and school district. Talk to your realtor about what demand is like in the area, and what kinds of location amenities tend to serve as selling points. If you can nail the location when you buy a fixer upper, one of your most profitable selling points is already built in. (Plus, if you’re buying a fixer upper to live in, you could get a real steal in an otherwise over-priced locality.)
You want your fixer upper to have good bones. That refers to both its construction and its layout, since both of these things are incredibly expensive to remedy later on. Keep in mind that paint and carpet are easy to change, but a crumbling foundation or a busted roof are going to take a big bite out of your profit. For that reason, it’s important to have a home inspection done prior to making an offer (and even better: to have more than one home inspection done) in order to identify any money pits in an otherwise appealing fixer upper and help you avoid a bad investment.As for layout, you want to buy a fixer upper with the maximum amount of appeal possible. Spacious rooms with a lot of natural light are ideal, as are layouts that are optimized for the flow of how people live (think open floor plans, bedrooms that are all on the same floor, etc.). You can move around walls and reconfigure plans if you have to, but like with the construction projects mentioned above, it’s a major expense that ultimately means less financial gain.
It can’t be stressed enough how critical it is that you get one or more experienced home inspectors through the door before investing any money in a fixer upper. This will help you budget for and prioritize the fixes that you’ll have to make in order to get the home ready for move in or to sell. It will also cue you in on any potential deal breakers. If you don’t want to spring for a brand new plumbing system or pay for an update of a home’s electrical wiring, you have to ensure you do what you can to identify these problems early on.A qualified home inspector will provide you with a report that outlines all of the fixes a home requires—both the easy ones and the hard ones. Use this list to price out your project, and also to divide your to do list into projects that need to be done right away, projects that you simply want to get done right away, and projects that can wait.
You never know what’s hiding behind those walls. Many people who buy a fixer upper choose to get other inspections in addition to the home inspection. These include:
The seller may already provide you with some of these inspection reports, or you may be able to request that the seller fronts the cost for them. Likewise, you could make your offer contingent on the home passing these inspections. If the seller does provide reports, be sure to check on the dates to make sure they are up to date.
Fixer uppers are notorious for surprising their buyers with unforeseen, expensive repair needs. Maybe you rip up a floor board to find rotting wood underneath, or come up against some pests who are reluctant to relocate. That’s not to say that you can’t buy a fixer upper when you’re on a budget, but you do have to leave room in your finances for surprise costs.Use a remodeling calculator to get a rough estimate of how much a certain fixer upper might set you back—then add about 10% on to that for wiggle room. You can save money in certain areas by going the DIY route and taking on a task yourself instead of hiring a professional, but unless you have a background in construction you’ll want to leave the major renovation projects to the pros.How you budget your fixer upper depends on what you want to do with it afterwards. If you plan to live in it yourself, focus your funds where it matters most to you (after accounting for any necessary repairs, of course). And if you’re planning to sell, start with the home improvements that are the most valuable and then work your way out from there. Exterior updates will go a long way, as will lending some TLC to the kitchen and bathrooms.
There is no guarantee with anything in real estate, and the same goes for when you buy a fixer upper. A big imagination is necessary, but so is smart financial decision making that is in line with both your budget and the market you’re buying in. If you’re ready to take the leap, start working with your real estate agent to narrow down your options in terms of location and properties, and find the fixer upper of your dreams.
Original Blog: https://www.moving.com/tips/5-things-you-need-to-know-before-you-buy-a-fixer-upper/