So you think you’ve found the house that’s just right for you. It’s in a great location, with the perfect floor plan. The catch? Your dream home needs a lot of work. Would you be better off instead of buying a new construction or a move-in-ready resale? Read on for some tips to help you decide if a fixer-upper is right for you.
Pros and Cons of Buying a Fixer-Upper
Here are some factors to consider before taking on a home that needs major work:
- You can put your own individual stamp on your fixer-upper. You get to pick out the colors, flooring, fixtures, and all the other features you’d love in your house without paying the generally higher cost of a new construction home.
- A fixer-upper can be bought for a below market value price. It’s a good way to get into a great neighborhood you might not have been able to afford with a move-in-ready or new construction home.
- You, not the previous owner, decide what areas of the house to spend money on.
- The lower sale price results in a lower property tax bill for you.
- The house may end up being worth more than you paid, potentially giving you a nice profit when you sell.
- The house won’t be move-in ready. You could be waiting months or even a year before you can move in. If you live there during renovations, you may have to cope with life in a construction zone for quite a while.
- You’ll need to come up with extra cash, from your savings or by taking out loans, to pay for renovations on top of your cost to buy the house.
- Your costs and the timeline may be unpredictable. It’s easy to go over budget or hit snags that delay the whole project. For instance, you remove some drywall and find a serious mold that requires immediate repairs.
- Lots of stress may come along with a renovation. Fixing up a house can be a big disruption in your life, especially if things don’t go as planned.
Evaluating Costs for Home Renovation
Before you decide to make an offer, take a look at these tips for gathering the information you need:
First, hire a home inspector.
The inspector will advise you on what shape the house is in and can help to estimate the costs to make the changes you’d want. Does the house need minor renovations, such as new flooring or replacement of doors? Or major projects like replacing the HVAC system and remodeling the ancient kitchen? Are there expensive structural problems that could make buying the house a bad idea? Knowing the full condition of the house will help you decide if it’s worth your investment.
Do your research before making the offer.
Get prices for renovations you intend to make. Ideally, have your contractor lined up, so they can walk through the house with you and give you a written estimate before you make an offer.
Look carefully at your finances and research any loans you may need. Make sure you’re not getting in over your head–becoming house poor will make your dream home not so dreamy after all. Remember to factor in the costs of living somewhere else during the renovation, if you can’t live in the house.
Decide what, if any, work you can do yourself.
Maybe you can do some painting and minor repairs, while you hire professionals to do electrical work and other major projects. Whatever tasks you can take on yourself will help your bottom line.
Consider the cost in the time you’ll need to spend supervising the renovations.
Even if you’re not doing much of the actual work, you’ll need to keep an eye on things and make sure the job is being done to your satisfaction. Avoiding miscommunication can prevent expensive mistakes!
Learn all you can about the neighborhood.
Walk around the block to see how well-maintained the houses are. Get comps for nearby homes and learn what upgrades they have that your house doesn’t, such as a new kitchen or hardwood floors. This will help you set your offer price and avoid improvements that are too pricey for that neighborhood, which could hurt the value of your investment.
How to Find the Best Home Contractors
Make a plan first!
Write down detailed descriptions of changes you want, and a list of questions to ask when you interview contractors. Are there different price options for certain projects? What’s included in the contract? Make sure the contractor details everything that will be done, including material and labor costs, and deadlines.
Don’t forget to add questions about safety practices to your list. Hearing and eye protection, safety clothing, and care with ladders are a few of the safety issues you’ll want to be aware of. Learning about the safety codes in your area may help you avoid a construction accident once work is underway.
Ask for referrals from your family, friends, neighbors who have had work done, or even your local hardware store. You should interview three or more contractors, asking all the questions you’ve prepared, and get a written estimate from each.
Check out contractors carefully.
Look up prospects with the Better Business Bureau. Ask for references. Get their credentials, such as membership in trade associations that require them to follow ethical guidelines. Make sure they’re licensed, bonded, and insured. And watch out for scams; don’t hire anyone who calls or visits you unsolicited.
Turn to your smartphone for help, too.
Apps such as Home Advisor and Angie’s List can recommend contractors, answer questions, provide quotes, and link you up with skilled, safety-conscious experts for all types of home projects.
Buying a house, of course, is the most important purchase decision most of us will ever make. Whether you end up choosing that fixer-upper or going the move-in-ready route, do your homework to make sure you get good value for the money spent on your dream home!