Calculating the Actual Costs of a Fixer-Upper: What to Consider
Dreaming of buying a fixer upper and making it your own? Maybe you already have a property in mind, or have even gone as far as contacting a few contractors for an estimate. You may think you have an idea of how much the repairs will cost, but more often than not, the true costs of a fixer-upper are much higher than you had imagined.
That doesn’t mean you shouldn’t buy that handyman’s special you’ve been eyeing for weeks. But it does mean that you should sit down and really calculate the costs that come along with a fixer-upper.
What Can You Do Yourself?
Reality TV makes home renovation look like a piece of cake. But in reality, renovations are often a tough job. They’re physically exhausting, and you never know what may pop up along the way. You need to be physically and mentally prepared for the project.
Sit down and really figure out how much of the work you can actually do yourself. If you don’t have any prior experience in the construction or home remodeling field, you may be limited by what you can do. Or you may be ambitious and will to make a few mistakes along the way. In either case, after you've found the dream cheap house, be honest and realistic about how much work you can take on, and which jobs you want to do yourself (if any).
Ask yourself these two questions:* Do you have the skills? Many projects are relatively simple and straightforward, but electrical and plumbing tasks are best left to a professional and could be dangerous if you try to take them on yourself.
* Do you have the time? If you work a full-time job, you may not have the time to truly dedicate to remodeling a home. On the other hand, you may be more than happy to spend your nights and weekends working on your home renovation project.
Find Out the Costs of Permits Ahead of Time
Even before you sit down and try to determine which jobs you can do yourself, you should find out if you can even go through with your project. Get in touch with your local planning department, and find out which permits you will need (if any), and how much they will cost. Permits aren’t always easy to get, and the process can be time-consuming, so start as early as possible.
If you’re not sure whether a job will require a permit, ask local officials. You may be tempted to do the work without a permit. After all, it will save you money. But you’ll lose in the long run, as the city may make you tear down your renovations (or your home) and you may have problems selling the home in the future.
It’s also important to decide whether you want to get the permits yourself, or have your contractor do it for you. Oftentimes, it’s better to have the contractor get them, but do keep on top of them to make sure that they actually do acquire the permits you need. Always remember that permits may add additional costs (and frustration) to the project. There’s the cost of actually obtaining the permit, and there’s the potential cost of inspectors requiring you to change your project or perform additional work.
Have a Contractor Assess the Home Before You Buy
If you’ve yet to buy the home, you can calculate the true costs of renovating the property by having a contractor take a look at the home. The contractor can provide you with a written estimate on how much the project will cost.
If you plan on doing the work yourself, you may want to calculate the costs of supplies before you put in an offer on the property. Regardless of which route you take, tack on an additional 10%-20% to the estimated costs to account for the unexpected.
Verify the Costs of Structural Work
Many fixer-upper homes need structural work, which can add significant cost to the project. Your best bet is to hire a structural engineer who can inspect the home before you even put in an offer, and give you a realistic estimate on the cost of repairs. The inspection may cost you between $500 and $700, but you’ll gain peace of mind in knowing the extent of the home’s structural issues.
And if you do decide to buy a home with structural issues, make sure that you get written estimates for the repairs before you buy. In most cases, you want to avoid buying a home with major issues like this unless you are buying the home at a significant discount, you know the full extent of the problem, you know that the problem can be properly fixed, and you have a written estimate that’s binding.
Perform Thorough Inspections
It’s important to have a contractor look at the home, but it’s equally important to have a thorough, professional inspection performed. This will help you truly understand the cost of fixing the home.
To cover most (or all) potential issue with the home, make sure that you have the following inspections performed:
* Septic and well (if applicable)
* Radon, lead-based paint and mold
* Home inspection
The home inspection is the key most important thing when buying a fixer-upper. A professional home inspector will find any hidden issues that will need to be repaired or replaced. Those old cabinets may be an eyesore, but they may also be hiding dangerous mold behind them.
It’s difficult to accurately calculate the true costs of a fixer upper. Murphy’s Law often comes into play when renovating a home: whatever can go wrong, will go wrong. Unexpected things will happen, and they will add to the overall cost of the home. Adding an additional 20% to 30% onto your calculated costs can help you be prepared for these scenarios.
A contractor can provide you with a base estimate, and a structural engineer can give you an idea of the extent of repairs needed with serious fixer-uppers. If you plan on doing the work yourself, be honest about how much time you have and the extent of your skills, so you don’t get in over your head when buying your new home.
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