A lot of people are attracted to the idea of finding an older house and transforming it into their dream home, or maybe they want to fix it up as an investment to sell or rent out. Either way, it can be a great idea, as long as you know what you’re getting into. Getting an older property move-in ready still costs money and usually takes a load of work. Before you commit, follow these tips to make sure buying a fixer-upper is the right path for you.
Estimate your home affordability
The first step of your fixer-upper adventure is estimating what kind of home you can afford. You can find plenty of online calculators to help you with the process. Home affordability usually considers factors like your annual income, monthly spending, current average APR, down payment, loan type, etc. For instance, someone who makes $45,450 per year and can afford a total monthly payment of about $1,327—after paying all other monthly debts—can generally expect to be approved for a $248,000 mortgage. Your down payment also plays a role in the process. A larger down payment generally means that you’ll need a smaller loan, that you can afford a higher-priced house, and that lenders will be willing to offer you a lower interest rate.
Shop until you find a good one
When you start looking at fixer-uppers, you’ll notice that you can get properties in great neighborhoods a lot more cheaply. While this is a legitimate benefit of fixer-uppers, you don’t want to jump on the first deal you find. Get the house inspected and bring in a contractor to help you estimate needed repairs. Once you get an estimated cost of repairs and renovations, add a 5- to 10-percent cushion for unforeseen problems. Then, add that total to the asking price, and compare it to the listing prices of similar move-in ready homes in the area. If the deal doesn’t make sense, be sure to negotiate. If that doesn’t work, walk away and keep shopping.
Prioritize your renovations
Once you have some estimations, you’ll want to plan out your renovations and repairs. When making these decisions, you’ll need to factor in whether you plan to stay in the home or sell it once it’s fixed up. If you plan to stay, you’ll have more freedom to tackle each room in whatever order you like. If you’re going to sell or rent the house out, you’ll probably want to get your kitchen and master bathroom in good shape before you move on to other rooms. Those rooms are usually the most important to prospective buyers, and you can add the most value to them through renovations.
If you’re staying in the home, you can renovate and design as you see fit so you can turn it into the house you’ve always dreamed of. If not, it’s a good idea to keep potential buyers in mind. Painting the walls light, neutral colors is great for making the rooms feel bigger, and they never go out of style. Replacing cheap cabinets, countertops, and flooring and modernizing appliances in your kitchen can add thousands to your sell price. Upgrading mirrors, light fixtures, and shower hardware will make your bathroom more appealing. A real estate agent can usually guide you on what kinds of homes are selling in the neighborhood. It’s not that you don’t want your house to have character, but you do want it to fit in to its surroundings to some degree. When budgeting for repairs, be sure to include the price of whatever tools and hardware you’ll need, like a power drill, table saw, hammer, and sander.
Knowing what you’re getting into is critical when you’re buying a fixer-upper. You’ll first want to estimate your home affordability to get an idea of what kind of homes to look for, and make sure to factor in the cost of repairs in order to know if it’s worth the time and money. Then, you’ll want to make a strategy for your repairs and renovations so you’re not just doing them on the fly. Buying a fixer-upper can be a great experience, as long as you consider these factors before you commit.
Article by Bret Engle.