What Should You Look for in a Fixer-Upper?
Thanks to home renovation shows, buying a home that’s a fixer-upper isn’t only something that can be a wise investment – it’s also trendy! While buying a fixer-upper can be both a money-maker and a money-saver in the long run, it also has a downside: it can cost a lot if you’re not careful.
If you’re on the hunt for a house in need of fixing up there are several important things to be aware of ahead of time, so you don’t find yourself in a major money pit!
- Focus on Locus. Whether you plan on reselling it after the renovations or want to use it as a profitable income property, the biggest rule in real estate still applies: location, location, location! If you purchase a fixer upper in an undesirable area, it’s going to be a difficult sell down the road. Even if you plan on the house being your forever home, whomever you leave it to at the end of your life will probably have a difficult time selling it as well, unless the area experiences a major turn around in the next 40-60 years, and that’s sometimes hard to predict. Ask your realtor to show you fixer-uppers near popular or growing areas of town, in desirable school zones, or in well-established neighborhoods. Another thing to consider with regards to the location is what the other homes in the area have to offer. Are most of the homes 4-bed, 2-bath homes with two living spaces? If the home you’re considering is only a 2-bed, 1-bath with one living room, you may want to consider the possibility and cost of additions to the home in order to compete with the other homes in the area.
- Fixate on Foundation. Typically, the best bet for a profitable fixer-upper is purchasing one that only needs cosmetic changes…but cosmetic renovations mean very little if the house’s bones are brittle. Make sure there aren’t any major foundation issues; have the home inspected by different inspectors even, just to be sure. According to House Logic, the major things to look at when monitoring for foundation issues are cracks in the walls (look around doorways, windows, and where the wall connects with the ceiling), cracks in the floors (specifically on vinyl or tile floors that’s laid over cement), doors that either get stuck or won’t latch, and windows that get stuck or won’t close properly. Other things to be aware of in this arena include things like outdated electrical wiring. If the wiring of a home needs to be completely replaced, this can cost a lot of money but won’t increase the value of the property down the road. Other things to be look at regarding the overall structure and function of the house include the roof, siding, HVAC system, and the plumbing.
- Favor Functionality. Plenty of people like a home to be unique, but not many people desire an uncomfortable layout. You may be able to knock a wall or two down to open a space up, but some things may be beyond changing, like a tiny bathroom, awkward locations of key rooms, and so forth. Take notice of these things; many times, they aren’t deal breakers, but they’re important to be aware of so you can be sure of the possibilities when it comes to renovations.
- Factor in Finances. It may seem obvious, but finances are a major part of the home renovation process. There will almost undoubtedly be costs that come up that you hadn’t originally planned on. According to financial guru Dave Ramsey’s blog, it’s wise to “do a basic cost analysis based on the worst-case scenario. Plan for at least one budget-buster by adding an extra 12% to your renovation estimate.” On top of the necessary things to factor in when it comes to fixing the house, such as foundational issues, be sure to consider all the cosmetic updates and additions you want to do. Painting and reflooring are big cosmetic changes, but if you want to add a deck out back, replace doors and windows, change light fixtures, get new appliances, or replace baseboards, work these estimates into your budget as well.
These are major things to look for or consider when on the market for a fixer-upper. Rarely is any home an absolute loss, but even if you see the potential, it may be best to leave some fixer-uppers for a different buyer. Focus on the purchasing the homes in need of the TLC that you can afford to provide and are willing and able to put the time and effort into.