It’s a dream come true; finding the perfect fixer upper to put your unique design into while realizing significant savings on your investment. If you can’t wait to get your hands on the once glorious but neglected house of the neighborhood, understand the rules of the game before taking the gamble.
Rule #1 of the fixer upper gamble: understand the motive behind your purchase. Are funding restraints driving your purchase? Have you fallen in love with the historic charm of the home? Maybe you enjoy the challenge a renovation project offers or have a vested interest in seeing the homes in your neighborhood restored to their original glory. The rationale behind your purchase ties directly into the level of commitment you’re willing and able to make.
Rule #2 of the fixer upper gamble: create a realistic timeline and budget for completing your project. If you’re in the market to totally restore a property, expect to invest substantially more time and money into renovations. When purchasing a home based solely on price, budget will dictate your level of commitment. If your intentions are to flip the home, tight budgets and time frames tend to dictate. Create a realistic timeline and budget for completing your project before making the purchase. If the plan is doable, go for it; if not, move on.
Rule #3 of the fixer upper gamble: perform due diligence before getting in over your head. Due diligence covers all aspects of the purchase. How much will a mortgage company lend you (if anything) for the purchase of the property and how much cash outlay is required? Customary fees include the cost of a title search, property survey, home appraisal, home inspection and pest inspection. If the home is in a flood zone, the mortgage company will require flood insurance. Understand HOA fees typically increase annually and plan accordingly. Budget all costs into the purchase amount and calculate the monthly payment to ensure you can afford the property.
Rule #4 of the fixer upper gamble: find out the average costs associated with major repairs and replacements. You can expect major costs to repair the foundation or replace the roof, heating/cooling system, water heater, electrical or plumbing system, windows, exterior paint and siding, septic system and concrete driveways and walkways. Based on typical life expectancies, determine how much leeway you have before a major repair or replacement is required. Can you afford the cost in the projected time frames?
Rule #5 of the fixer upper gamble: recognize your capabilities. Are you a handy person that can fix just about anything or is professional help required? Hired help comes at a cost whereas DIY fixes are much more economical. Be realistic when assessing your capabilities and plan accordingly.
Rule #6 of the fixer upper gamble: check out the neighborhood. Do homes in the area have a tendency to appreciate or depreciate? Is the property located in an historic district where you’ll likely face design restrictions? Are any construction or rezoning projects underway or on the horizon that will affect the use of the property? Any of the above situations may be cause for plans to be altered or scrapped entirely.
Rule #7 of the fixer upper gamble: review the contract. Sellers must disclose any known defects of the property. Inspection contingencies written into a contract allow the buyer to walk away from the purchase or request the seller make repairs to anything discovered during an inspection. Buying a property “as is” means just that – the property is sold in its current condition with no credits given for the cost of any defects. Protect yourself by understanding the terms of the contract.
Now that you’ve learned more about what to consider before purchasing a fixer upper and you’re still on board with making this type of investment, congratulations! There’s a charming fixer upper out there waiting for you to find it and turn it into the home of your dreams.