TV shows sometimes make buying a fixer upper house look like an excellent idea. But we all know that reality TV is hardly ever real.
Is buying a fixer upper worth it? What about buying a fixer upper as your primary residence? Here’s what you need to know about fixer upper homes.
What is a Fixer Upper?
There’s no mathematical formula that must be followed for a house to be considered a fixer upper. A fixer upper is simply a house available at a lower price because it requires repairs, upgrades, or renovations.
Sometimes you can live in a fixer upper while completing home improvement projects. Other times people interested in investment properties will complete the improvements as quickly as possible – without moving in – to achieve a profit.
Here are some things to consider before purchasing a fixer upper home.
Is It Worth It to Buy a Fixer Upper Home?
Unfortunately, the answer to this question is, “It depends.” Discussing significant financial decisions with a financial adviser who understands your assets and debts is always wise.
Yes, real estate can be a great investment tool, but risk is involved. So here are some considerations before you buy fixer upper houses.
Get a home inspection.
A professional home inspection will cost you a couple of hundred dollars, but it is worth every penny in the peace of mind a professional inspection offers.
A home inspector will provide you with a report that outlines all that is wrong with the home that may go unnoticed by someone without training.
For example, when you look at the fixer upper home that just became available, you may envision yourself thoroughly cleaning and replacing the carpet and bathroom tile. However, a home inspector will be able to tell you if the foundation is cracked and the attic is full of squirrel feces.
A home inspection will help you avoid unpleasant surprises that may come up as you complete repairs on the home for resale.
Understand the “as-is” sale.
Even if a buyer lists their property “as-is,” you should still insist on an inspection. In fact, you can still include an inspection contingency in your offer in case something catastrophic is uncovered.
An as-is sale means the seller is unlikely to make or pay for any repairs. While you may want to lower your offer based on an “as-is” listing, the seller is not obligated to negotiate.
Don’t overestimate your renovation expertise.
Watching hours of remodeling shows doesn’t make you a renovation expert. Home repairs are hard work and require technical knowledge, especially if the repairs involve structural, electrical, plumbing, or roofing systems.
Your friends or family members who say they will help may soon tire of assisting you with your fixer upper project.
Price out materials and labor costs before buying a fixer upper.
Do a reality check and understand the exact cost of the materials and labor (including tax and delivery) for completing the renovations. Although you may not be able to get professional estimates before putting in an offer on the home, you can at least get estimates on how much each project will cost to help you determine if the investment is worthwhile.
Don’t forget – some projects require permits, which add to the project’s cost.
Consider the neighborhood.
As a rule of thumb, buying the least expensive property in a neighborhood is always a good idea. However, if you renovate a home and increase the property’s value, you may price yourself out of the local market.
Home renovations can be stressful.
Some people enjoy completing home repairs and renovations. They don’t mind living in a chaotic, messy environment. Others go crazy during home remodeling projects. What type of person are you? What about your spouse, kids, or pets?
Don’t forget to add contingencies to your offer.
As we mentioned earlier, adding inspection contingencies to an offer is common. You may also consider adding an appraisal contingency, allowing you to back out of the deal if the house isn’t as appraised as expected.
Always be willing to walk away from the deal if the seller isn’t willing to negotiate.
Consider the real estate agent fees when determining if you will profit from the deal.
After you complete the renovations on your fixer upper and decide to sell, you’ll likely owe between five and six percent of the purchase price to the buyer’s and seller’s agents. Of course, the real estate agent fees will eat into your profit.
Consider Earning Your Real Estate License – Colibri Real Estate Can Help
If you enjoy buying properties to renovate, consider earning your real estate license. This will enable you to act as your own real estate agent for all your transactions, saving you money.
In addition to saving money, you’ll be on the front lines when excellent investment properties become available. Of course, you must disclose if you are acting as your own representative if you decide to make a purchase.
Finally, when you earn your real estate license, you will learn more about the pricing of properties. You’ll gain knowledge to help you determine if a fixer upper is priced low enough to make a profit during resale.
Is buying a fixer upper a good idea? That depends on your unique situation. However, if you are interested in real estate, consider going through the steps to earn a real estate license.
It’s a simple process. Learn more by visiting the Colibri Real Estate (formerly Real Estate Express) website. Click on your state, and we will walk you through the process. It’s more affordable and straightforward than you would think. In fact, you could earn your real estate license in just a few months.
