With increased buyer demand, homes needing a little TLC are going on the market, and regardless of how much fix-up these homes require, they are selling quickly and sometimes at a high price. These expensive houses, listed with descriptions like a fixer-upper, TLC, and needs work, are in competitive markets and rising in number.
Buying a fixer-upper home can be a nightmare, or it can be a good whopper of a deal. The secrets lie in choosing the right fixer-upper home to buy and getting the fixer checked out by a host of specialized inspectors.
Consider asking yourself these five questions before investing in a fixer-upper property.
1. How bad is it?
The severity of the problem can vary. Some properties may need just a few thousand dollars worth of paint job, while others may require a total overhaul. As might quickly conclude, the less work a property needs, the less risk you’ll have to incur if something were to go wrong during the rehab.
At the same time, however, the less work a property needs, the more competition you’ll face. Try to find properties that appear to need a lot of work to the general public but may require only minor fixes. For example, homes sometimes have a bad smell because of pets, type of food cooked, or cigarettes and are a prime candidate because those smells are easy to rectify. An ugly exterior paint job or a bad roof can scare away most potential homeowners but is not very difficult to fix. So, before buying a fixer-upper, look at what is wrong with the property and get a detailed estimate of what it will take to fix it up. Don’t get blindsided by surprise costs later.
Examples of easy fixes are:
• Patching walls, stripping wallpaper, and painting.
• Refinishing floors, laying tile or carpet.
• Installing ceiling fans and new light fixtures.
• Replacing baseboards or adding trim.
• Fixing broken windows.
• Installing new or refacing / painting kitchen cabinets.
• Replacing doors.
• Changing out receptacles and light switches.
• Painting the exterior.
Examples of more expensive fixes are:
• Replacing HVAC systems or adding central air.
• Shoring up foundations.
• Reroofing, when it involves a tear-off.
• Replacing all plumbing, sewer lines, and electrical.
• Installing replacement windows throughout.
• Complete kitchen/bath remodels.
• Building garages/additions.
2. Is it worth it?
Another key factor to keep in mind is that a fixer-upper is not automatically a great deal. If you bought a house for $300,000 and spent $100,000 fixing it up – would you be better off than buying a home that did not require work for $400,000. When all other factors are kept equal, the finished house has an advantage. But if you got the same property for $250,000 and spent $75,000 fixing it, you can walk away with a handsome profit. Also, consider the time value of money as the time spent fixing up the house could be spent doing something else more profitable. That leads to the next question.
3. Do I have the time?
No matter who is doing the work, a fixer-upper will take time. You may have to be present at the property frequently to make sure work is going as per plan and budget; otherwise, the project’s cost can balloon beyond your original method. If you plan to rent a multi-family you purchased but don’t get the place fixed in time to get tenants moving in, you can lose the rental income that far exceeds the profit you may make from an excellent fixer-upper deal.
4. Do I have the skills?
First, ask if you will be living in the property while you fix it or rent it out. Since many people looking to get started with a fixer-upper rental properties plan to do the work themselves, they often live at the property while fixing it. Consider this if this is your profession or if the work is small enough that you can manage on your own.
Working by yourself on your rehab can save you money and help you manage similar projects more efficiently in the future. Now, let’s look at the last question, one of the most important ones to answer.
5. Do I have the drive?
Ask yourself what skills and motivation I have to take on a project of this size and how it will drive me to complete it. Are you going to seek help from friends and family, or will you hire professionals who will do all the work? Whatever your answers are, getting a clear picture of your key driver will provide you with clarity to make the decision. Also, keep in mind that the first fixer-upper is always the most challenging.
So think about these five questions when you are considering a fixer-upper. It can create wealth for you, as long as you carefully weigh the pros and cons. You must do your due diligence on any fixer-upper you plan to work on. Develop a detailed plan and account for potential pitfalls. Then take action and get cranking.
If you are looking to buy a property, let’s talk – give me a call or text me.