If you’re thinking about purchasing a fixer upper for your next home, or even as an investment opportunity, slow down and be sure to do your research. With the popularity of reality TV shows like Flip or Flop, Fixer Upper and Rehab Addict, many people have caught “fixer upper fever.” Without the insight of experienced professionals, however, what looks like a good buy can quickly turn into a huge money pit.
As a Real Estate Consultant with more than 30 years as a licensed Realtor in Arlington, VA, I’ve seen firsthand how many of these “bargain” fixer uppers end up being much more trouble, and money, than they are worth. If you’re not sure if a fixer upper is right for you, consider how you’ll feel when, after the sale is final, you’re now hit with a whole new stack of expenses, bills, schedules, and projects that might take months while you live in a hotel. Instead, consider the option of buying a home that is close to perfect for what you want, taking out a slightly higher 30-year mortgage, and moving in right away to enjoy your new home. This way you are able to conserve cash for special projects and upgrades in the future, doing what you want when you want it, without rush, pressure and bills hanging over your head.
Still dreaming about a fixer upper? It does work for some people. Here are some considerations when trying to decide if a fixer upper is right for you.
When considering a fixer upper, professionals recommend looking for homes that need cosmetic improvements rather than structural changes or major renovations. Cosmetic improvements are easier, quicker and less expensive. Often you don’t need a permit. (Always check to be sure, though.) And the surprises that add drama and fun to reality TV shows are less likely to occur in real life – where they really aren’t all that fun! Major renovations and structural changes, on the other hand, have a tendency to become much larger projects than anticipated, costing extra time, money and frustration to get the job done.
Additionally, while structural improvements may update, enlarge or make a home more desirable, cosmetic changes generally have a better return on investment.
If you do decide to take the plunge and invest in a fixer upper, be sure to estimate your renovation costs in addition to the cost of the home purchase with the help of licensed professionals who perform a thorough assessment of the condition of the house and property. You will likely want to have the assistance of a home inspector and a local Realtor with in-depth knowledge of the area.
Your Realtor can help you determine the projected value of your fixer upper using local comps, share what the schools and property values are like, and provide recommendations for local licensed professionals. Knowing the home’s estimated market value once the renovations are complete will then help determine potential profit.
As you’re running the numbers, remember that experts often recommend adding 5 to 10 percent extra into your budget to account for unforeseen problems. If you’ve watched any of the shows we mentioned earlier you’ll know that costly “surprises” always happen, no matter how well you plan.
The rewards of a fixer upper can be significant, as long as you do your research and understand the reality of what you’re about to get into. Just remember to buy wisely, be cautious, and seek the advice of local experts and trusted professionals to guide you along the way.
* Not sure if you need a permit for your project? Check out this article, Do I Need a Permit for My Remodeling Project, by clicking HERE.