It’s a romantic idea – buying a fixer-upper and making it your own. But there are homes that need renovations, and then there are homes that need a complete overhaul.
It’s easy to get excited and caught up in the moment when you find a quaint little house in the perfect location at an irresistible price. That’s why far too many home buyers wind up making costly mistakes that they regret later on down the road. Learn from their mistakes and avoid these blunders when buying a fixer-upper.
First and foremost, you need to know the local market and the market value of the home. Knowing this information will help you avoid paying too much for the home, or buying in an area where you’re not likely to see a return.
On top of knowing the market value of the home, you need to consider the costs of renovating it. Far too often, home buyers take into account only the base value of the home and overlook the fact that they will need to put time and money into fixing the property. Sure, that home may be dirt cheap, but will the cost to bring it up to standard leave you with little-to-no equity? If that’s the case, it’s not worth buying.
It’s easy to get caught up in the excitement and emotions of finding a great fixer-upper. And when you let these emotions take over, you have a tendency to rush the buying process and overlook important details. Remember, these homes are often sold “as is.” Even though no repairs will be made, it’s still important to ensure that you have a thorough inspection performed by a true professional.
Once you leave emotion at the door, you can sit down and really consider your limits. If the property checks out, you need to consider whether you have the skill or finances to renovate the home.
It’s not uncommon for home buyers to purchase a fixer-upper without getting an estimate from a local contractor. When you go this route, you wind up guesstimating the cost of repairs. Unless you have experience as a contractor, you’ll likely underestimate the cost of renovating the home.
Even if you plan on doing most (or all) of the work yourself, talk to local contractors and ask for estimates on repair costs. These estimates will give you an idea of how much you’ll wind up spending on both the purchase of the home and renovating it.
If the home needs major repairs, you may consider 203k FHA financing. This type of loan covers not only the purchase of the home, but the rehabilitation as well. And all of this is covered through one simple mortgage.
The final cost of a home renovation is rarely the same as the initial quote. Unexpected things pop up, and oftentimes, they add to the cost of repairs. Installing a new shower can be a complex process if the plumbing needs work. Even seemingly simple repairs can come with costly and unexpected complications.
That’s why it’s so important to find a reputable contractor who will provide you with a realistic estimate.
But even with a realistic estimate, it’s still important to leave room in your budget for unexpected costs. Most experts recommend adding 20% to the costs of estimates, and expect the work to take 20% longer than initially estimated.
Many home buyers buy a fixer-upper, and imagine that the process is like what they see on home renovation television shows. That couldn’t be further from the truth. Be prepared to spend several months living in the renovation, and be ready for unexpected things to happen every step of the way.
That’s not to say that renovating a home isn’t a rewarding experience – it is. But you need know what you’re getting into and manage your expectations appropriately.
In a perfect world, the renovations would go off without a hitch. But things rarely happen this way, and unfortunately, some home buyers have to abandon their renovation plans.
Having an exit strategy, or a plan B, can help you be prepared for the worst case scenario. Consider all of the things that could go wrong or change, and create a list of solutions that can help you resolve these issues – or get out of Dodge.
We touched on this earlier, but it’s important to reiterate the need for a home inspection when buying a fixer-upper. Many home buyers rush into the process, get swept up in the moment and never have a thorough inspection performed. Later on down the road, they wind up overpaying for the home.
Allow yourself enough time to have the right professionals check out the home, and have an inspection performed. The last thing you want is to be stuck with a renovation project that is far bigger than you had anticipated.
Many home buyers think they want to put in the work, but when it comes down to it, they just don’t have time, energy, money or skill to get the job done right. It’s easy to underestimate the costs of fixing up a home when you’re staring at the home’s low price tag. But not being realistic about how much work needs to be done can be a costly mistake.
Know how much work needs to go into the property. Know whether you will realistically be able to devote that time, money and effort.
Renovating a home can be a lucrative opportunity – if you find the right property. However, it’s important to really know what you’re getting into before you commit to buying the home. Have a home inspection performed, work with local contractors to determine how much repairs will cost, and be honest with yourself about whether you truly want to devote the time and effort into renovating the home.