Before buying a fixer upper, be aware of:
- Your limitations – Do you have ample time on your hands to oversee a renovation or are you swamped with work? Are you completing much of the renovation without a contractor or do you need to hire someone for the majority of the work? Make sure you know your time and capability limitations before taking on a fixer upper.
- Your risk tolerance – From the unknowns about what lurks behind the walls to the financial risks, buying a fixer upper is not a risk-free undertaking. Most home buyers need to have some degree of risk tolerance if they plan to buy and renovate a home.
- Your budget – You absolutely must set a budget before taking on any renovation project. Know what you can and cannot afford to do. Explore different contractor bids and plan the renovation budget accordingly. Make sure you have plenty of wiggle room in the budget for unforeseen problems that almost always arise when renovating a fixer upper.
- Your financing options – How are you going to pay for the renovation? Many home buyers put the majority of their cash towards a down payment. Without money left over, you’ll need to explore financing options, such as a home improvement loan, home equity loan, credit card possibilities, and government loans.
- Your local housing market – Make sure you have a good handle on the local real estate market before purchasing a fixer upper. This should help ensure that you get a fixer upper for the right price and avoid overpaying at the beginning of the process.
- Your local permitting requirements – How fast or slow is your local permitting process? In many cities, getting a permit for any change to a home can take months. If the home is located in a historic district, be aware that the permitting process may be even more arduous.
- Your contractor options – Do you know of reputable contractors in your area? Do friends, family or neighbors have someone they can recommend? Make sure you have plenty of good options before purchasing a fixer upper.
What to look for in a fixer upper
Considered all of the points above and still set on buying a fixer upper? If this is your first fixer upper experience, get ready for a wild (sometimes fun) ride. The process can be exciting, stressful – but oh-so-worth it once it’s complete. The advantages of buying a fixer upper can far outweigh the cons in many cases. Best case scenario: you purchase the fixer upper for a good price, with plenty of wiggle room to pay for improvements. You dramatically improve the value of the home (without going broke), and you’re eventually able to move into your dream home. Ta-da! Let’s hope that’s how your future renovation turns out. In the meantime, you’ll need to be very particular about which fixer upper you decide to buy. Here are five things to look for when choosing a fixer upper to purchase and renovate.
A great location
One of the most common reasons why home buyers choose to purchase a fixer upper over an already updated home is the great location. Oftentimes, you can get into a desirable neighborhood at a much lower price point by buying a fixer upper. For many, it’s the only way they can truly afford to land a property in a coveted location. For resale purposes, it’s especially important that you consider location when looking for a fixer upper. Purchasing a fixer upper in a less desirable location isn’t usually a smart move because you may not be able to recoup your losses on the home when you go to sell it in the future.
The degree of potential
Does the home have plenty of potential? Can the walls be moved? Can the ceiling be raised? Is there anything in the home that is salvageable or is it a complete tear-down? Is there room and enough land for an addition? Can you add more bedrooms? These are the types of questions you should be asking when touring a fixer upper. You want to make sure that the home has plenty of potential to do with it what you want. We recommend walking through the home with a professional contractor before buying it. The pro should be able to give you insight and opinions on what you can and can’t do to the property. A good contractor should also know whether or not permitting rules will limit your renovation goals.
Reasonable price per square foot
When it comes to buying and renovating a fixer upper, you’ll need to make every dollar count – and that includes the initial selling price. Avoid over-spending on a home you wish to renovate. Otherwise, you could end up in over your head – not to mention, living in a house that you can’t actually afford. Many home buyers make the mistake of over-paying for a fixer upper. This means less wiggle room in the budget and less money for renovations. Make sure to work with a seasoned and reputable Realtor who really knows the market and can help make sure you secure the most bang for your buck. Remember: if you can’t buy the house for the right price, it may be best to walk away and wait for something else to hit the market.
Good bones
Unless you’re planning to completely tear down the home, it’s important to assess whether or not the fixer upper has good bones. This means everything from the construction materials and roof condition to the floors, HVAC, and electrical systems. Chances are you’ll have to replace or change out some of the home’s structural components. However, if the overall bones of the house are good, you could end up saving yourself a bundle of money (not to mention, a number of headaches) down the road.
DIY possibilities
Does all of the work need to be done by professionals? Are there simple projects, such as painting, wallpapering, and landscaping, that you are capable of completing without a contractor? Make sure to pay attention to whether or not the home has DIY possibilities – as well as your own abilities to do the job. If it looks like you’re going to need a contractor to do all of the work, then you’ll need to carefully consider whether the cost is worth it. Contractors and subcontractors aren’t cheap. If you’re unable to do any of the work yourself, then you may be better off purchasing an already updated home.
