Have you searched high and low and can’t find your dream home? Do you keep finding homes that need work, or the finishes are not to your liking? Have you considered a fixer-upper?
If you’re thinking of selling your home and buying a new property, you may want to consider purchasing a “fixer-upper”. A fixer-upper is a home in need of updates and repairs and often sells for a lower price per square foot than move-in ready homes. I have personally bought three fixer-uppers, each progressing in the scope of work and budget required. Here’s what you should consider if you are thinking about buying a fixer-upper.
What repairs need to be done? Are there any major items that will need to be replaced soon, such as the furnace?
A good home inspection can help unveil deferred maintenance and necessary repairs. Each home is unique but understanding if the home is outdated but well cared for versus neglected with years of deferred maintenance that will add significant costs to fix will help guide you to pick the right house. It’s not just about new kitchens, tile, flooring, and picking paint. You need to understand the condition of the home and what is necessary to bring the condition of the home to livable standards before moving on to the pretty stuff.
What renovations are needed? How much, realistically, are those going to cost?
It’s easy to think big and grand, but having skilled contractors and realtors can help provide you with feedback on what is realistic for your budget – before you get too far and end up with a house that requires more work than your total budget will allow. You are not looking to get a fixed cost at this point, but knowing if the renovations will cost $50k or $150k is important to know before making the offer.
How much of the work can you do yourself?
Be careful not to overcommit past your skill set. Being honest with your skills and capability and knowing when to call in professionals will actually save you time and money. I know my limits – I am a messy, impatient painter and it takes me longer than the pros – my time is better spent elsewhere and I am glad to pay painters that can give me clean lines.
How long will it take for the improvements to get done? How long will you need to live with drywall dust or pay for two mortgages?
Longer than you think! Working with an experienced contractor can help you with a realistic timeframe, then add more time to what ever they give you. It takes time for architect drawings and permits before work can begin. Always add a buffer to allow yourself time, its better to get things done right when not under the pressure to move. Sometimes one event, like delayed plumbers or fixtures can really change a timeline. I have learned the hard way and always say after the fact, nothing was so urgent that we needed to be in the house – I should have allowed more time for them to get it right, than rushed.
How does the price of a comparable “move in ready” property compare to this one?
Is all the work really worth it? A skilled real estate agent can help you understand after-renovation value and help you understand your options to make a decision based on facts. We did a house that came in way over what we originally budgeted and we didn’t even look at houses in that price range before we started.
Do I have the financial resources for a down payment and renovation costs?
You should plan on issues to arise that were not part of the original plan. Considering the scope of work to be complete, you should build in a 10%-20% contingency budget. Does 20% sound too high? You should make sure you have the resources for the just-in-case. Most renovations go over budget so having a contingency in place will make decision making easy when issues arise. Include any new furniture purchases in your budget. There’s nothing worse than moving into your newly renovated home and realize you have no money left over to furnish it.
So what?
Unfortunately, buying a fixer-upper is not like the TV shows, no one is going to deliver you a home renovated, fully furnished, and camera ready. Ultimately, you’ll have to weigh the pros and cons before buying a fixer-upper. As an experienced fixer upper and a realtor, I can help you understand hat is involved when tackling a home purchase for renovation. One thing I realized is how fun home renovation projects really can be. There is a great sense of accomplishment and satisfaction living in a space that is personal to you.