Important Factors to Consider When Buying a Fixer-Upper

Research from Realtor.com found that 60 percent of consumers shopping for a home want one that needs some work. When you are looking at homes, the low sale prices of fixer-uppers can be very tempting. You may be able to snag a property that is undervalued, make the necessary improvements, and then benefit from that additional equity. However, before you decide to put an offer on a home that is in need of repairs, you should ask yourself some questions. By taking these factors into account, you can determine if buying a fixer-upper is the right move for you.

Is the home in a great location?

The worst house in the best neighborhood is a much better investment than the best house in the worst neighborhood. You can't change the location of a home. Therefore, you need to be satisfied with the crime rate, schools, hospitals, proximity to your job, and other details about the area before you even consider buying a home.

Does the house have “good bones”?

If a particular home needs a lot of cosmetic repairs but has a solid roof, stable foundation, desirable floor plan, and quality construction, it can be a terrific buy. Don't dismiss homes that have good bones in a wonderful location but are just a little too small. In this scenario, you can easily add square footage and storage space with the construction of a garage or other outbuilding.

A garage can protect your vehicle, as well as provide storage for seasonal gear and tools such as boats, lawn mowers, ski equipment, and snow blowers. When building a garage or other external structure, choose the best materials that you can afford. Many choose to build a wood structure, but wood can rot from moisture and is susceptible to termites, wood ants, and other pests. On the other hand, you can build faster with steel because steel parts are pre-cut and immediately ready to be erected. Steel is also extremely durable and low maintenance, saving money on repairs and replacement in the long-run. It can also withstand heavy snow, high winds, torrential rains, and fire.

Do you have any skills?

Unless you are a pro yourself, you should hire experts to handle things like plumbing and electrical work to make sure everything is done properly, safely, and up to code. However, if you have DIY skills, you can cut costs by doing some of the work on a fixer-upper yourself. If you can do drywall, install cabinetry, lay flooring, or paint the house yourself, you can buy the materials and save on the labor costs.

Do you have enough money for renovations?

Budgeting for renovations can be difficult because you never know what you might find behind the walls of a fixer-upper. Do you have enough cash flow that you could afford several thousand dollars for surprise mold removal or the need to rewire the house? Unexpected expenses will inevitably pop up, and you have to be prepared to handle them physically and financially. The Fannie Mae HomeStyle loan and the FHA 203(k) renovation mortgage allow you to finance home improvements within a conventional mortgage. With these programs, you borrow money based on the improved value of the home, so you end up paying less out of your pocket for renovations.

Buying a fixer-upper isn’t for everyone. Renovations always seem to take longer and cost more than you might expect. However, if you buy a house that needs work, you’ll be able to put your personal stamp on it – picking out the exact colors, materials, and finishes that you want throughout the home. Weigh the pros and cons of purchasing a fixer-upper and carefully consider if it’s the right choice for you and your family.

(Guest article courtesy of Suzie Wilson)