Proceed With Caution: What To Think About Before Buying A Fixer Upper
Proceed With Caution: What To Think About Before Buying A Fixer Upper
While most people are looking for a move-in ready home that needs little to no work, some brave souls are up for the challenge of a fixer-upper. You can snag it at a great price, and it gives you an opportunity to create your ideal home. And, should you ever sell someday, you can make a nice, tidy profit. But, this undertaking isn’t for the faint of heart, and it is certainly not a decision to be made in haste. Here are just a few things on which to chew before deciding to go this route in the real estate game.
Are You Really Up for the Challenge?
Before you buy a fixer-upper, give some careful thought as to whether you are really up for the challenge. The notion can seem really exciting at first, before all the work starts. This undertaking really makes the most sense when the homeowner pitches in as much as he can since saving money is often a driving force behind the decision to buy such a home—for a bit, you may be basically working a second job as an unpaid contractor.
Are you up for frequent visits to the Home Depot? If you aren’t so handy, and are relying on the services of contractors for most of the work, are you ready to do the legwork necessary to find the good ones, and take on the role of supervisor? There is a reason most people want move-in ready homes—fixing up one that needs a lot of work, is well, a lot of work! Don’t let the lure of a low purchase price overshadow everything that is involved in making the house a true home.
What to Look for in the Ideal Home
Some fixer-uppers are clearly better candidates than others. For the most part, you want to focus on homes that primarily need cosmetic improvements—not only are these projects less involved, the gain in market value compared to what you are spending is very attractive. Some things that fall under this umbrella include updating the kitchen and bathroom, floor refinishing, repairing drywall and replacing siding.
Certain types of improvements are not necessarily major red flags, but may or may not be worthwhile since the return on investment may be nil, or minimal at best. These types of renovations are the ones needed to make the house more similar to the surrounding ones, such as adding an additional bedroom, family room or basement.
Then there are problems where your best bet is probably to walk away. If there are major structural problems, like ancient plumbing or faulty wiring, or foundation issues, think twice. These types of ‘’invisible’’ repairs cost a lot, and will not add enough value to recoup renovation costs. It is expected a home will have proper plumbing and electricity, and the foundation is in good condition so they are not the type of things you can charge more for should you sell it.
If you have any suspicions about mold, make sure you look into it; the presence of mold can suggest many expensive repairs, such as extensive drywall replacement or lot grading. Be wary of houses with less-than-ideal floor plans—it is easy now to think you will ‘’get used to it,’’ but you might not.
What to Offer
Formulating a good offer is important for any home, but especially for a fixer-upper as you will be pouring a lot of money into it. First, you need to get a good assessment of the costs of renovations from an experienced contractor. Then, you need to figure out the probable market value after you fix it up, based on comps from the neighborhood. Subtract the renovation costs from the market value, then pad that at least 5 to 10 percent to account for issues you can’t possibly anticipate now, mistakes and the like. That final number is what you should offer for the home.
Kelli Cooper has blogged about all things real estate, from mortgage tips to how to find a real estate agent; she recommends visiting Roll Off Dumpster Direct for more information about dumpster rentals in Maryland.
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