Buying a fixer-upper can be a great real estate investment, but the secret is finding the right house. There are obvious benefits to buying a fixer-upper, including lower sales price, less competition, resale potential and the satisfaction of a job well done.
Fixer-uppers may have their spot on reality television, but buy one yourself, without all the glitz and glam of television, really save you money? We take a look.
Shows like Fixer Upper and Property Brothers on HGTV are entertaining to watch. But if you’re amazed at how little they spend in the course of an episode, there’s a reason it’s so cheap. First, because it’s on TV, so they’re helping to pay the cost. Second, it’s cheap to work.
The actual process of financing a fixer-upper and then putting in the work to make it your (or someone else’s) dream home, is a lot more complex than a TV episode can depict.
Whether you are a new homeowner or a long time homeowner, taking care of your home is probably a top priority because more than likely, it is one of your biggest investments. If you are looking to either build equity or get the most money when you sell your home, you might be wondering “is fixing up a house worth it?”
We are going to go over the top home improvements you can make to increase the value of your home.
Looking for the best home repairs services? Look no further! Hitch Property Constructions has you covered.
The first thing potential buyers will see as they walk towards your home is the outside. This is why first impressions make all the difference. Making the outside appealing will make a buyer want to walk through the front door to see more.
A landscape that is well maintained will let buyers know that the home is well-maintained. If you are on a budget, you can opt for colourful plants and shrubs to make your front yard look alive. Stick to plants that are native to your region because they will require less maintenance and less water.
Redo the Roof
Investing money into a new roof will recover 105% of the money you put in when you sell your home. New owners are making a big purchase, and they would much rather know they are buying a home that they won’t have to worry about the roof in the near future.
Calling in a reputable company like Point Roofing gives you an estimate on a new roof and gives you an idea of how much life your current roof has left.
The kitchen is an area that will always increase the home value and will sway a potential buyer into buying. If you are on a tighter budget, you can swap out all fixtures such as drawer knobs, faucets, and pulls to give the kitchen a more modern look if your current fixtures are outdated.
If you have money to spare, you can swap out the cabinets and countertops for something that is more in style. You can also change out the appliances to stainless steel if your current appliances are older.
If your bathroom is outdated and in need of a paint job, this is a great room to update that won’t break the bank. People like to feel like they are in a spa when they enter their bathroom, and you can help give this relaxed feeling with a few upgrades.
Replace the vanity, toilet, and fixtures for a total bathroom makeover. You might even want to invest in a new tile floor if the current one looks worn or older.
When A Fixer-Upper Might Be A Good Idea
You want to make the home your own.
The beauty of buying a house that needs work (or “a little TLC” as we real estate agents like to say) is having free rein to choose what you want in your house — everything from the floor plan and building materials down to the light fixtures and hardwood finishes. Put: You get to turn the house into your dream home — and, usually, at a much lower price than if you were custom-build from scratch.
Just be sure to check the local zoning laws before you buy a fixer-upper since you’ll need to obtain building permits if you make structural changes. The national average cost of a building permit is $1,036, according to HomeAdvisor. If a house is located in a historic district, you may be prohibited from altering parts of the property altogether.
You have enough money set aside for renovations.
Budgeting to renovate a fixer-upper is challenging because you don’t always know what you’ll find when you start construction. For example, if you discover that there’s mould behind the drywall, it could cost anywhere from $1,000 to $20,000 to remove it, according to HomeAdvisor.
Ready to take the next step? A financial advisor can show you how all the pieces of your financial plan fit together.
Plus, you’ll need enough cash flow to finance the renovation costs, since you can’t use a conventional mortgage to pay for remodelling work. That’s why a lot of people buy fixer-uppers with a 203K loan, a mortgage insured by the Federal Housing Administration to help buyers who don’t have a lot of cash to purchase a property in need of repairs. A couple of caveats: There are limits to how much you can borrow (they vary by location). And, even within those limits, you can only borrow enough to finance either up to 110 per cent of the home’s projected value after rehabilitation or the value of the property before rehabilitation plus the cost of rehabilitation. The maximum loan amount is the lesser of these two options.
You can get a great deal.
According to a Zillow Digs report, Fixer-uppers list for an average of 8 per cent below market value. Granted, in some parts of the country, that doesn’t mean a lot of savings. Fixer-uppers in Phoenix have the smallest cash discount, saving buyers just $1,000 off list price. But you can save a lot of money in expensive markets like San Francisco, where fixer-uppers have discounted an average of 10 per cent — giving homebuyers $54,000 in upfront savings for renovations on the median home, the report found.
You may even be eligible for a tax abatement, a tax credit for homeowners who improve their property’s value. Another advantage of buying a fixer-upper: Property taxes are based on your home’s sale price so that you can save money on your taxes each year.
You want to flip a house.
Some people make serious cash flipping houses. A house flip yielded an average profit of $62,624 in 2016, according to ATTOM Data Solutions. But bear in mind house flipping isn’t as easy as it appears on TV. Last year, 12 per cent of flips sold at break-even or a loss before all expenses, according to a RealtyTrac analysis.
Check out our Melbourne home repairs to help you to build your dream house.
When A Finished Home Might Be A Good Idea
You want to move in ASAP.
Buying “move-in ready” can be a huge benefit to your lifestyle. You won’t have to wait weeks or months until the house is in a state to be occupied — or live in an unfinished home under construction. Also, you don’t have to deal with the stress of rehabbing a fixer-upper. (It’s a lot of work.) Instead, you can spend your first days as a homeowner simply enjoying your new digs.
You’re on a fixed budget.
When you buy a fixer-upper, you can encounter unforeseen expenses during the renovation process that can force you to stretch your budget. This was my main reason for buying a move-in ready home two years ago rather than a fixer-upper. Also, I liked knowing that my house — which had been recently remodelled top to bottom — was already in good shape. I haven’t had to call the handyman once!
You don’t have an eye for design.
Buying a fixer-upper is like building a house from the ground up — you need to make a lot of decisions about the layout and building materials. This can be difficult if you are indecisive by nature, have no architectural or design background, or have a different aesthetic from your spouse. But when you buy a move-in ready house, everything from the kitchen backsplash to the bathroom tile has been decided for you.
Is the Problem Cosmetic or Structural?
Cosmetic fixes are those that would make a house prettier, like replacing unattractive awnings or painting or landscaping — “things that won’t cost a lot of money and won’t require a lot of contractors,” says Ilona Bray, author of Nolo’s Essential Guide to Buying Your First Home. You’re more likely to find these kinds of homes now, too.
But if the problem is structural, you might want to pass, especially if you’re new to home repair. Fixing it will be expensive and possibly time-consuming, but the issue could be a sign that the house is not in good shape. Structural problems would involve anything that requires a contractor or knocking down walls, like trouble with the foundation, termites, or plumbing. These are things that should be found on a home inspection, which generally happens after you’ve made your bid and before closing on the house. If any structural issues are found on that inspection, think seriously about whether or not the home is going to be worth the extra cost.
Cosmetic Repairs Vs. Structural Repairs
The most important determining factor in whether or not a fixer-upper is worth the work is the type of repairs it needs. Generally speaking, cosmetic repairs cost much less and are easier to complete than structural, electrical or plumbing repairs.
Cosmetic repairs take time and commitment. If you have the patience and determination to make your fixer-upper look better, you stand to gain from the purchase. Here’s a quick list of pricey repairs to avoid (or keep to a minimum):
- Replacing HVAC systems
- Foundation work
- Large scale plumbing, sewer, and electrical replacements
- Pouring concrete
- Complete remodel in the kitchen & bathroom
- Room additions
How Much Do The Repairs Cost?
Suppose a repair costs more than it adds to the resale price than it might not be worth it. When you’re viewing homes, make a list of repairs and closely consider the price of those repairs.
Traditionally, cosmetic improvements like paint touchups, floor refinishing, windows, siding, and new lighting are the most lucrative improvements. Here’s how to do the math to figure out how much a fixer-upper is worth:
Estimated cost of repairs (materials + labor) + 5% for unforeseen problems
Subtract this from the estimated home’s market value after your renovations. What’s left should be your offer (how much you should be willing to pay for the home).
Location, Location, Location!
Location matters when considering a fixer-upper. A house on a busy street, across from a sewage plant isn’t desirable and still won’t be desirable even with a new coat of paint and wood floors.
The key is finding a neglected home in a desirable neighbourhood that you can bring back up to the area standard. Remember, great schools are also important to most homebuyers, so a house by a top-rated school will be a good resale.
Do You Have the Time?
If you’re the kind of person who wants to go to the gym after work and wants your weekends free to go to the movies, then you’re not a candidate for a fixer-upper. Fixer-uppers are time drains, and they disrupt your life.
But if you have an alternate place to stay while the work is being done or can continue to rent and pay the mortgage on a new place, the disruption won’t be a big issue. Of course, if you’re a DIY diehard and love the process of turning one thing into another, then the disruption might not bother you as much as someone who likes things neat and clean and finished.
If you’re hiring a contractor, you also need time to do some research before asking for bids. That way, you’ll have a better idea of what things should cost when calling a contractor and which contractor in your area is the best person to use.
Realtors often get involved in fixing houses they’re trying to sell so that real estate agent might be a good source for candidates. Get at least three estimates for any work you’ll need to be done, ask for references, and if possible go and see examples of their work. You can also ask your neighbours who they used and what they thought of the work.
Do You Have the Money?
If you pooled every last penny for that down payment, you’re not going to have much leftover for home renovations, so you might be better off buying a house that’s livable as is. But if you have money set aside for repairs or plan to take out a loan, make sure you get an accurate estimate and then add another 20 per cent on top of that. If you’re doing everything with borrowed money with no margin for error, think again. There will be extra expenses, no matter how carefully you plan.
And don’t forget to factor in those extras that pop up when you’re living in a disrupted space: child care, dog care, takeout, and days missed from work because you have to be at home when the contractor is there.
Expect some things to go awry and when you’re budgeting for your fixer-upper, face the fact that at some point you’ll probably need to call in an expert.
How Solid Is Your Relationship?
Buying a house is a stressful experience. Throwing a renovation on top of that, especially for a lot of first-time buyers, isn’t always ideal. “A lot of people move into houses soon after they’ve entered a long-term relationship,” says Bray. “That can be tough on a relationship if you’re trying to figure out these difficult things that have big implications for your finances and how you want to spend your life.”
If you’re single and still want to fix up an older home, make sure you have a network of helpers and never do the work by yourself. “The other person’s perspective is invaluable in figuring the best way to attack and complete a project, and by using a checks-and-balances system you ensure you’re not skipping steps and you’re using the right material — and you’re just getting some help getting the job done,” says Jennifer Musselman, author of Own It! The Ups and Downs of Homebuying for Women Who Go It Alone. “If you’re fortunate to have handy family members or friends, definitely enlist their help. Just make sure to enlist the help of people you trust and know their level of experience and expertise in what you’re asking them to do. Nothing could start a family feud faster than getting free help, and someone accidentally breaks something or does something wrong.”
The one thing you want to make sure you don’t do, whether you’re single or not, is to watch the myriad of renovations shows on television and think that those dramatic and quick transformations will be your experience. Remember, that’s not reality TV, and you might end up a disaster episode. But if you plan with your time, money, and resources, your handyman’s special could be more than worth it.
We have an extensive range of home repairs Melbourne services at Hitch Property Constructions.
Is Fixing Up a House Worth It?
Now that we went over the top home improvements to increase home value, we hope you can answer “yes” to the question “is fixing up a house worth it?” Now you can make an informed decision on which improvements fit your budget and will make sense for you to invest in.
Buying a home is complicated and stressful enough, so unless you’re 110 per cent committed to investing the time, money, energy and elbow grease into repairing a house, you may want to buy move-in ready. If you’re starting and can’t afford to pour unexpected costs into a big project, buying a home as-is can be an easier introduction to homeownership. On the flip side, DIY-ing your dream home comes at major costs but could be a good move if you have the resources and know-how to do so.