What to Watch Out For When Buying a Fixer Upper
If you are in the market for buying a home, you may have considered purchasing a “fixer-upper” to try and save money. You may even be considering a fixer-upper from a real estate investment perspective after watching one of the many shows on television that focus on “flipping” fixer-uppers. While it is true that buying a home that is a fixer-upper can save you money and can be a profitable real estate investment, there are a number of factors you need to consider before committing to that route.
Along with the prevalence of ads devoted to flipping homes for profit and do-it-yourself renovation projects, the recent recession in the United States has provided a much larger inventory of fixer-uppers. All too often, when a lender forecloses on a home, the homeowners abandon the property; however, they may vandalize the home or remove everything of value (including things like fixtures, cabinets, and sinks) before they leave the home. The home often sits that way for months, even years, before someone purchases the property. Buying a home that fits this description may be biting off more than you can chew so to speak. Regardless of the reason why a home falls into the fixer-upper category, there are some things worth considering before you decide to tackle the home.
- Inspection – always have a home inspected by a licensed inspector before you agree to purchase the property. Whether you plan to tackle any needed repairs yourself or make the sale contingent on the seller making the repairs for you, you must know the extent of the damage. While some problems may be obvious, even more serious structural problems could be lurking below the surface.
- Cost – make a detailed list of what each repair will cost. Use conservative estimates and then add ten percent to that total. Do you have the funds to make all the necessary repairs?
- Ability – this is not the time to over-estimate your own abilities. If you have never renovated a home before, don’t assume that you can “figure it all out” when the time comes. Be realistic about what you can do yourself and what you will need to hire a professional to do for you. Make sure you include the cost of hiring those professionals into the total cost of the project.
- Time – remember that not only does tackling a fixer-upper require a financial investment but it also requires a time commitment. Do you have the extra time to work on the home yourself? Can the home be lived in as is while the repairs are being done or will you need to find other housing for the interim? Can you afford that?
- Value – is the home a good real estate investment in the long run? Renovations and repairs to a home rarely increase the value as much as the renovation costs. Check the “Cost vs. Value Report” to find out how much of a return for your money you can expect from the projects your fixer-upper requires.
Buying a home that is considered a fixer upper could be an excellent opportunity to create the home of your dreams. It may also be an excellent real estate investment opportunity. Before you make the decision though, crunch the numbers and talk to your real estate agent about your options to ensure that you make the right decision.