Some people, like myself, love the idea of customizing and personalizing a home and would rather buy a fixer-upper versus one that has already been remodeled. While others may be hesitant at the thoughts of the inconvenience and time involved. But, if you have been shopping for a home, but none pass your test for likeability – customizing and personalizing a home may be the route you should take.
Here are some things to consider.
Is the fixer-upper worth fixing up?
When you’re looking at fixers, ask yourself:
• Are the needed repairs cosmetic or structural? Cosmetic fixes generally cost less, are easier to complete and provide instant eye appeal. If the home needs new wiring, plumbing and a roof, you’re talking big money.
• Are the repairs required worth it? A new roof or renovated kitchen may be worth the investment if you’re staying put, but may not pay off for a flip. It depends on the project and your market.
• Who’s going to do the work? Whether you do it yourself or hire others, you’ll pay for it — in time, money, and/or stress.
• How well do you handle disruption? From dust and debris to the daily parade of workers, some people would rather just pay more for a more finished home.
The thing about fixer-uppers is that you can’t be sure about everything that needs fixing-upping, especially problems behind walls. A good inspector can sniff out plumbing, electrical and foundation problems that will cost a lot to remedy and may not make this deal cost effective. Bringing wiring and plumbing up to code isn’t optional, and you should know exactly what problems you’re dealing with.
To help estimate the cost of remodeling projects, you can use a remodeling calculator which produces an approximate cost for your area. Once you’re serious about a place, you can hire a contractor to provide an estimate for renovations.
Of course, lovingly nursing a home back to health is priceless — for some. But for most people, the math that makes a fixer a good investment is easy. Figure the cost to renovate the property (add another 10 percent for unforeseen problems and add-ons) and subtract that number from the home’s probable, post-renovation value gleaned from comparable sales.
Do you want to flip the fixer?
Finding a fixer can be a flipper’s dream, but only if the home needs low-cost cosmetic upgrades you (or a reliable, affordable crew) can do. The trick is to get in and out before financing costs or a market change eat your profit.
Don’t buy a fixer with major foundation, electrical, plumbing or HVAC problems — all are expensive and time consuming to repair. Opt instead for properties where you can refinish hardwood floors; remove a non-load-bearing wall to open the space; update a kitchen with new cabinets, appliances and counters, and renovate bathrooms that don’t require moving the plumbing.
Outside, you can increase the home’s curb appeal by adding foundation plants, greening up the lawn and pruning plants.
If you plan to make the house your dream home, keep all receipts. Capital improvements, usually considered upgrades that increase the value of your home, become part of the new tax basis of your home and may provide some tax breaks on profits when you eventually sell.
How to finance your project
Throughout the years, there has been a rise on homes needing anywhere from a slight remodel to complete overhaul. Lenders have caught on to this demand in the marketplace and offer renovation loans. The extra money required are all rolled into the loan for the purchase of the home, so it’s all one mortgage. To know more about which lenders offer these programs, contact me!