Considering a Fixer-Upper? Read This First.
By Ray Flynn, civil engineer and co-creator along with Bret Engle of DIYguys.net.
When to buy a fixer-upper
Do you love the charm and character of older homes? If you do, a fixer-upper might be the perfect solution. Whether it’s the crown molding, archways, hardwood floors, architectural gems, or other little quirks, there’s something endearing and magical about older homes. When that older home has other quirks you find less charming—an outdated kitchen, chopped-up rooms, too few closets—one solution includes updating and improving upon the original by adding amenities common to newer homes.
Finding the perfect home
Scour the internet, and check out local tax records for past sales prices and tax bills. Visit the local clerk of court’s website to identify foreclosures and short sales, and check out foreclosure listings. Estate sales and auctions often yield possibilities, but do your research before you go—don’t make an uneducated bid. In Greenville, SC, a fixer-upper home lists for an average of $279K.
Once you’ve found the perfect house, schedule a home inspection with a qualified inspector. If you plan to undertake structural projects, it’s worth the investment of a few hundred dollars to ask a general contractor to attend the inspection, too.
Look for good bones: solid infrastructure, character, a floor plan you like, a sturdy foundation, and load-bearing walls/beams. Keep your budget in mind—in addition to the purchase price, you’ll need to set aside money for significant repairs and cosmetic updates. An inspector will identify any major issues with a home’s foundation, roof, electrical system, and plumbing system. The contractor can provide a ballpark estimate for major repairs and renovations, like knocking down or moving walls, replacing the roof, windows, or flooring, and upgrading kitchens and bathrooms.
How to finance a fixer-upper
Two different mortgage types are specifically designed for people buying fixer-uppers. If you don’t have the savings to cover the down payment and cost of renovations, explore the Federal Housing Administration (FHA) 203(k) rehabilitation loan or Fannie Mae HomeStyle Renovation Mortgage.
Prepping for DIY
When you plan to do much of the construction or cosmetic work, arm yourself with the proper tools for the job. Your toolkit should include the right power tools, like sanders, drills, and jigsaws. This list of 2018’s seven best home tool kits for DIY home improvement projects is a great place to start.
Projects to tackle first and save for later
Congrats! You’ve closed on the house. Now what? You have two options: You can start with the small stuff first, like painting or ripping out that 70s shag carpet, or go big with a larger-scale remodel. Evaluate and let your your budget, available time (if you’re going to DIY), and patience for living in a home that’s under construction guide your timeline.
Cosmetic upgrades, like new light fixtures, carpeting or refinished floors, and paint are relatively easy, inexpensive DIY projects that boost a home’s market value. Slightly more expensive projects include new vinyl windows and exterior siding, which also increase a home’s value.
Many homeowners prefer to live in a home for a while before embarking on a major remodel. However, kitchens and bathrooms really do sell a home, so if you’re going to splurge or upgrade, spend the greater part of your budget on either of those rooms. Bathrooms, for example, have an average return of 84.6 percent. If your budget allows for major work from day one, plan carefully with your contractor to create a schedule that works for you and your family, especially if you’re going to live in the home during the renovation.
Stay or sell?
You can absolutely sell your home immediately after you finish renovations, but think about whether you’ll recoup the money you’ve invested, especially if you’ve invested a lot. Many experts recommend abiding by the five-year rule.
If you don’t sell for more than what you owe on the mortgage, you’ll take a loss. Don’t forget to add in closing and other transaction costs associated with home sales. If you do sell for a profit and you haven’t owned your home for at least two years, you will pay capital gains taxes.
Photo Credit: Pexels.com
Photo Credit: Pexels.com