Buying a house in today’s market can be a challenging task. It is no surprise that many budget-conscious homebuyers prefer a fixer-upper to a move-in-ready home. The idea of owning a fixer-upper might as well be tempting to folks who enjoy old properties and enjoy working on them.
Just imagine this: You can get a derelict property in a decent neighborhood for a fraction of the market price, renovate it, and end up with a like-new home that is worth at least double what you paid for it. Sounds appealing, right?
Usually, that is the case. But buying a fixer-upper, on the other hand, can be risky. A fixer-upper home has its own set of benefits and disadvantages.
So, before you get in, make sure you know what you are getting yourself into.
What Is a Fixer-Upper?
A fixer-upper is a home that is available at a cheaper price because it requires significant renovation. Although you may still be able to live in a fixer-upper, you will have to invest a significant amount of time and money in structural and/or cosmetic improvements. If you want more property for your money or want to flip it for a profit, a fixer-upper can be the way to go.
Read our home restoration guide to make sure you know what you are getting yourself into.
1. Get A Home Inspection:
While a house inspection might set you back a few hundred bucks, it’s crucial if you’re looking to buy a fixer-upper. A certified home inspector will do a complete inspection of your property and give you a report detailing all the necessary repairs.
You may not realize the house requires new plumbing, the septic tank needs updating, or the foundation is cracked if you do not have one. A home inspection may help you budget for and prioritize renovations, as well as avoid unpleasant surprises.
An inspection clause should be included in the real estate contract. At best, the inspection will convince you that the house is a wise investment; at worst, it will assist you in getting out of the deal.
If the inspector notes a serious structural, mechanical, plumbing, or electrical issue, you could use it to persuade the seller to pay for repairs or lower the sale price.
A home inspection is essential for any house purchase but especially important for fixer-uppers.
2. Do A Cost Analysis
Simple math can help you figure out how much you should pay for a fixer-upper.
First off, add up the price of renovating the property based on a thorough inspection of its condition. Be as accurate as possible with this estimate, which should include both your and other people’s materials and labor.
Subtract it from the home’s projected market worth the following remodeling, as determined by nearby similar real estate prices. Then subtract at least another 5% to 10% for optional extras, unforeseen difficulties and disasters that must be addressed, and inflation. What’s remaining should be your offer.
Although you might want to undertake many of the repairs and maintenance yourself, you may need to hire a professional for projects that are above your skill set, such as structural, electrical, and plumbing work, so keep that in mind as well. Make a list of all the projects you wish to do and estimate the materials and labor costs.
You should also account for any architectural or engineering plans you might need for major renovations.
After doing some online research (Get a free quote from Lolark Contractors). Even if you won’t be able to come up with an exact cost for everything, you’ll be able to come up with an approximate amount that will help you to budget and determine whether the investment is worthwhile.
3. Check To See If a Permit Is Required
Some renovations may necessitate the acquisition of permissions. Of course, the location of your home will determine whether modifications require permits, however, permits are required in most towns and cities for:
- Structural work
- Constructing additions
- Making garages or sheds into livable space
- Fences above 6’ height
- Plumbing and electrical work
- Adding fireplace
- Creating new door openings etc.
You can apply for permit either online or in-person at your local government office based on which city or county your house is in. Detailed blueprints may be required depending on the complexity of your project.
4. Make A Smart Offer
Overpaying for a fixer-upper is the last thing you want to do. The whole idea of purchasing a fixer-upper is to get a decent deal on it. Make an offer that is a good deal for the seller and provide you with desired ROI.
Contingencies should be included in each offer. Contingencies are exceptions that allow you to cancel a purchase if unforeseen circumstances arise. Inspection and appraisal contingencies are two frequent contingencies. You have the option to back out if an inspection reveals a severe fault or the home appraises for less than what you offered.
Should You Buy a Fixer-Upper?
Purchasing a fixer-upper property will depend on your unique situation. You will need to consider your finances, requirements, preferences, and lifestyle before making a decision.
Also, consider if you are purchasing it purely for the purpose of investment and quick ROI or as your long-term residence. This will impact the kind of changes you want to make in the house. Another thing to consider is if you will be able to live in that house while you are making the changes.
Purchasing and fixing an existing older home that needs substantial work is not for the faint of heart. A fixer-upper can come with numerous obstacles but the rewards can outweigh those challenges.
A fixer-upper may appear to be a terrific offer you can’t pass up at first glance. However, after you understand how much money and effort you will need to spend on repairs and renovations, you might want to reconsider. Carry out the rigorous inspection and make sure it’s a wise investment before moving forward with a fixer-upper.
You can get started today if you’ve done your homework and are ready to renovate a fixer-upper.