Buying a fixer-upper can be a fulfilling, rewarding experience — or a total nightmare!
If you’re not careful, that charming little bargain might have hidden damage that significantly increases the price and increases the amount of work needed. If you’re planning on living in the house, this can be intrusive and frustrating. If you’re looking to flip the home, this could be a financial disaster. Here are 5 hacks for buying a fixer-upper.
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1. Decide on your Goals
You should decide whether you’ll be living in the house or flipping it before you make the purchase because this decision will guide many of your future actions. For example, if you want to flip, you should have contractors lined up for all work before you make your bid. Time is not on your side when flipping; the longer it takes to sell, the higher your costs. Flipping will affect your cosmetic choices, too. In your own home, you can add any personal touches you want and develop the home to your own preferences. But if you’re selling, you want to make generic, non-controversial design choices in line with current trends.
2. Finding a Good House
As MoneySense explains, most buyers are superficial, so houses that have been on the market for a while are great candidates for fixer-uppers. It could be that everyone saw a dirty or old-fashioned house and were either put off instantly or didn’t want to spend the money on remodeling. Of course, you’ll need to do your due diligence and ensure there isn’t a more serious reason the house hasn’t sold yet. However, if you can find a worn-down place that’s been on the market for a while, you’ve got a strong justification to make a low-ball offer. You can also look up foreclosed homes in your area or simply tell a few agents what you’re looking for, as they’ll have a good knowledge of what’s available.
3. The Buying Process
Fixer-uppers require a bit of extra work before buying, as well as afterward. Make sure you have the house fully inspected, especially if the house is in a deep state of disrepair, has been on the market for a very long time, or has a particularly low asking price. Remember, a highly rated inspector can make all the difference in unearthing major problems that will save you money and headaches. The average cost of a home inspection is $278 to $390, so consider that money well spent if you avoid a disaster. If the inspection results yield moderate concerns, and if your negotiation skills are decent, you might be able to persuade the current owner to foot the bill for some of the repair costs. If you want to flip the house (the median sales price for a home in Mesa is $254,000), you should also do an in-depth analysis of all your costs versus the potential sale price, and use this to guide your bids.
4. Doing Repairs Yourself
If you hire contractors to make renovations, you’ll be paying one or more people an hourly rate to complete jobs, on top of your material costs. So to minimize your overhead, you’ll want to complete as much work yourself as you can. Make sure you have the right equipment for the job. Buy or rent power drills, jigsaws, sanders, levels, stud finders, and other equipment ahead of time, according to the work you’ll need to be doing. Of course, the extent of DIY work you do will depend heavily on your time constraints and skill level. Be honest about this, and if you’re a novice, pick a home that needs only minor repairs.
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5. Living with Construction
One of the most important factors in buying a fixer-upper is determining where you will live during renovations. If you can afford to live in your current home, you’re in luck. If you need to live in your new home amidst construction, you’ll need to be prepared mentally and financially. Ideally, there should be a few rooms where you can live in comfortably that provide retreat and can be exempt from construction. You’ll also need to budget for a storage unit to hold your belongings so they aren’t vulnerable to damage.
Alternatively, and assuming you have the space, you could spring for a prefabricated steel storage shed to put in your backyard, one that can be used to store your possessions during the construction process and after. Not only are they relatively low cost and easy to set up, but a prefab steel building can safely keep your things secure on your property, as opposed to stored inside a unit that could be miles away from where you live.
Buying a fixer-upper is not for everyone, and that’s part of the reason you’ll have less competition and be able to buy at a lower price. While it’s true that a worn-down house can sometimes turn out to be more trouble than it’s worth, diligence and caution can help you avoid these nightmare scenarios. If you plan carefully, and you’re realistic about the costs, a fixer-upper could turn into your dream home — or turn a tidy profit!