Who is willing to buy a fixer-upper? According to a CNBC report, nearly 68 percent of millennials say they would purchase a home in need of major repairs. While they’re the group most willing to embrace a home in need of renovation, they’re not the only one. Roughly 60 percent of Gen Xers and 45 percent of baby boomers also say that they would buy a fixer-upper. If you believe that a house in need of some tender, loving care could be your dream home, proceed with caution. Not every fixer-upper is a good buy. While you shop, keep the following tips for buying a fixer-upper in mind to ensure you don’t sink your money into a house that’s not worth fixing up.
Tips for Buying a Fixer-Upper
It’s easy to understand the appeal of a fixer-upper. As Freshome explains, buying a home that needs work can be a great way to extend your purchasing power. It generally allows you to purchase a home that is larger or located in a more desirable neighborhood for less than you would expect to pay for a polished property. It also gives you a chance to create a customized space that reflects your taste and lifestyle. However, if you buy a fixer-upper, you must be ready to complete the necessary renovations, so it’s vital that you select a property that you have the resources to tackle.
By following these tips for buying a fixer-upper, you should be able to sort through the possibilities and locate your new home.
When you’re shopping for fixer-uppers, you want to look beyond the surface stuff. Things that can be changed without great expense or upheaval shouldn’t deter you. However, issues that will require major structural repairs or high-cost renovations should make you wary. The Balance suggests that you prioritize three things:
- The Floor Plan: Building an addition or tweaking an existing floor plan is generally achievable, but major reworkings of a home’s layout tend to be complicated and prohibitively expensive. Selecting a fixer-upper with a floor plan that is close to what you want can protect your budget and your sanity.
- The Condition: Cosmetic problems like ugly paint and outdated fixtures are easily fixed. Dealing with structural issues, moisture problems, obsolete mechanical systems, and termite infestations can be nightmarish. Before setting your heart on a fixer-upper, carefully identify all its issues and verify that you have the resources to address them effectively.
- The Location: No amount of renovation or sweat equity can correct a bad location. If the property’s location is undesirable, keep looking.
Be Meticulous About Inspections
Major issues aren’t always obvious, and problems that appear simple on the surface may actually be complicated. According to FortuneBuilders, bringing in a qualified home inspector to evaluate the property is essential. In fact, you may want to go a step further and ask specific professionals like general contractors, plumbers, electricians, roofers, and pest control specialists to perform additional inspections and provide you with information about the cost of needed repairs.
Do the Math
How do you know if you have the resources to handle a particular fixer-upper? BiggerPockets suggests doing the math. Add up the estimated costs of the planned renovations. Estimate high, and give yourself a buffer of at least 10 percent. Then, determine the expected return on investment of the various renovations. This time, be conservative. Compare the two figures and the likely impact on the home’s value. Finally, consider your resources. Ask yourself if this property is a good match for your wallet.
Get a Fix on the Finances
Buying a fixer-upper means planning for renovations, and even if you’re handy and able to do much of the work yourself, there will be costs involved. Having a plan to pay for the necessary renovations and repairs is critical. According to This Old House, a renovation loan can be a smart solution because it allows you to borrow against the home’s expected value (after it’s been renovated) instead of its current value. This lets you borrow enough to buy and renovate the home with a single loan.
Whether you’re planning to purchase a fixer-upper or you’re ready to make improvements to your existing home, you can count on PrimeLending of Wichita, Kansas. We offer a wide range of home loans and refinancing options. Contact us today to learn more.