There are many reasons why people fall in love with the idea of buying a fixer-upper. Do you adore the charm and character that an older home brings to the table? Are you a bargain hunter looking to snag a great deal? Do you see the reduced cost of a fixer-upper as a way to secure a home that you couldn’t otherwise afford? Are you delighted by the challenge involved in renovating a space? Are you intrigued by the idea of making a profit by flipping a property? Do you appreciate the opportunity to put your own stamp on a home? Whatever your reason for shopping for a house that’s in need of some TLC, be sure to keep these tips for buying a fixer-upper in mind.
Tips for Buying a Fixer-Upper
Many buyers prefer a home that is move-in ready, but savvy shoppers recognize that a fixer-upper can present an amazing opportunity for someone who isn’t afraid to get their hands dirty. However, there are pros and cons to any home purchase. Not every fixer-upper is a great deal. In fact, some are more likely to turn into financial nightmares than dream homes. How do you select the right fixer-upper for your needs?
Recognize an Ideal Fixer-Upper
How do you sort the gold from the dross when shopping for a home to renovate? The Balance suggests that you weigh these three essential factors:
- Location: With any real estate purchase, location is a major factor. Much like being in a nice neighborhood or a good school district can increase a property’s value, being in an unpleasant one can sink a home’s value. If you wouldn’t buy a move-in ready house in a particular location, don’t purchase a fixer-upper there. No amount of renovation can fix an undesirable location.
- Layout: Some renovations are more expensive than others, and moving walls can be both expensive and impractical. Even if you’re planning to add on or finagle with the floor plan a little, it’s best to buy a fixer-upper with an appealing layout. Doing so will help keep both the hassles and renovation costs more reasonable.
- Condition: Cosmetic problems like peeling paint, outdated fixtures, and missing trim are easier and more affordable to fix than structural issues with roofs or foundations. Likewise, signs of termites or moisture problems can indicate that larger issues may be simmering out of sight. When choosing a fixer-upper, it’s important to evaluate its condition carefully and select one with manageable issues.
Make the Right Offer
Paying too much for a fixer-upper is always a mistake. How do you determine how much you should offer? This Old House recommends that you do a little math.
Start by evaluating the work required and estimating what the necessary renovations will truly cost, including permitting, materials, and labor. Don’t sugarcoat these costs; be brutally honest. Then, use the real estate prices in the area to determine the property’s value after the improvements are completed. Next, subtract the costs of the renovations from the expected value. Finally, deduct at least another 10 percent for unforeseen issues and extras. The answer that you’re left with is the amount that you should offer.
Don’t Skimp on the Inspection
Obviously, having an accurate assessment of the house’s condition is crucial when you’re weighing whether or not to purchase a house that’s in need of work. That’s why any list of tips for buying a fixer-upper tends to highlight that getting all the proper inspections done is important. As HouseLogic indicates, you should hire experienced professionals to perform any relevant inspections. The home inspection is a good start, but it’s wise to add inspections for radon, mold, lead-based paint, pests, and the sewer to your list as well.
Explore Financing Options for Fixer-Uppers
When you buy a home in need of repairs or renovation, you have to be prepared to pay for both the purchase and the updates. A home renovation loan can be the ideal tool because it’s designed to fund both objectives. As ValuePenguin notes, there are many renovation loans available. The exact details and requirements vary according to the loan program, so it’s worth taking some time to explore your options. Talking with a trusted lender can help you learn more about the pros and cons of the different renovation loans so that you can discover which one is the best choice for your goals.
Now that you’ve reviewed our tips for buying a fixer-upper, are you ready to start shopping for a house? When you’re searching for the right renovation loan, turn to PrimeLending Twin Cities. We delight in helping our clients achieve their home ownership goals, and we offer a wide array of loan programs so that we can match you with the right loan for your unique needs. Contact us today to get started.