It looks effortless on TV, doesn’t it? Home buyers with small budgets but unlimited energy buy a diamond in the rough and easily transform it into their dream home – or a place they can sell for a pretty decent profit.
So you may be planning to seek out a place you can easily afford today and fix later, when you have the time and money. A handful of individuals have completed it, but remember that unfortunately, reality isn’t the same as reality TV. Most of the time, a fixer-upper needs a lot of elbow grease, time, imagination and patience, more than ever if you’re renovating and living in the home at the same time.
Or you may have enough money to purchase a fixer and complete everything prior to moving in. Either way, here are some things to think about.
Is the Fixer-Upper Worth Fixing Up?
When you’re looking at fixers, ask yourself:
• Are the needed repairs cosmetic or structural? Our realtors say that cosmetic fixes usually cost less, are easier to complete and provide instant eye appeal. If the home needs new wiring, plumbing and a roof, you’re talking big money.
• Are the repairs required worth it? A new roof or renovated kitchen may be worth the investment if you’re staying put, but may not pay off for a flip. It depends on the project and your market.
• Who’s going to do the work? Whether you do end up doing it yourself or hiring others, you’ll pay for it — in time, money, and/or stress.
• Just how well do you handle disruption? From dust and debris to the day to day parade of workers, some individuals would rather just pay more for a more completed home.
Understanding The Numbers
The thing about fixer-uppers is that you can’t be sure about everything that needs fixing-upping, especially problems behind walls. An exceptional inspector can sniff out plumbing, electrical and foundation problems that will cost a lot to remedy and may not make this deal cost effective.
Bringing wiring and plumbing up to code isn’t optional, and you should know exactly what problems you’re dealing with. After that, if you still choose to move forward, you might have some price leverage, even if you are purchasing the house “as is.” It’s never a bad idea to politely ask for a price reduction after the seller sees the list of problems.
To aid in estimating the cost of remodeling projects, our agents say you can use a remodeling calculator which generates an approximate cost for your area. Once you’re a bit more serious about a place, our real estate agents say you can hire a contractor to provide an estimate for renovations.
Next, make sure you figure the cost to renovate the property (add another 10 percent for unforeseen problems and add-ons) and subtract that number from the home’s probable, post-renovation value gleaned from comparable sales. What’s left should guide your bid for the property.
Do You Want to Flip the Fixer?
Trying to discover a fixer can be a flipper’s dream, but only if the home needs low-cost cosmetic upgrades you (or a reliable, affordable crew) can do. The main thing is to get in and out prior to financing costs or a market change eat your profit.
Don’t buy a fixer with BIG foundation, electrical, plumbing or HVAC problems — all are expensive and time consuming to repair. Additionally, once you begin replacing wiring and pipes, our agents say you’ll most likely be ripping open walls that will often times require patching and painting, which adds a few extra days to your project calendar.
Rather, our real estate agents recommend you opt instead for properties where you can refinish hardwood floors; remove a non-load-bearing wall to open the space; update a kitchen with new cabinets, appliances and counters, and renovate bathrooms that don’t require moving the plumbing.
Outside, you can make the home’s curb appeal more appealing by adding foundation plants, greening up the lawn and pruning plants. Our Realtors say that if you plan to make the house your dream home, we highly suggest you keep all receipts. Capital improvements, typically thought of as upgrades that bring up the value of your home, become part of the new tax basis of your home and may even provide some tax breaks on profits when you eventually sell.