With all of the home renovation and fixer-upper shows on television, the idea of completely renovating and re-doing an old home can seem like an enticing premise. Unfortunately, investing in the wrong fixer-upper can mean an awful lot of expenditure without the added financial rewards. Whether you’re considering investing down the road or are ready to dive in, here are a few things to consider first.
How Much Do You Want To Spend?
It’s easy to be swept away with the possibility, but before making an offer you’ll need to sit down and determine exactly what you’re willing to invest into upgrades for your fixer-upper. By deciding what you would want to renovate, what the cost of materials and labor would be and how this figures into the market price of the home, you’ll be able to determine if the price you’re offering will be worth it. If the cost to renovate is greater than the market discount on the home, you may be better off buying another home that doesn’t require so much work.
Are Major Repairs Required?
It’s one thing to consider a nice paint job and new tiling in the kitchen, but if there are serious issues with the home, it can create huge financial issues to put money into it. Because foundational issues or water damage throughout the home can be expensive items to repair and will take time and resources, fixing these issues may cost more than the money you’ll make. If you’re uncertain about what you’re getting into, it may be a wise decision to bypass the investment all together.
Are You Willing To Work?
Most home fixer-uppers that people buy can be financially lucrative because the buyer is interested in doing a lot of the work themselves. However, if you’re thinking of hiring people to do the work for you, this can end up costing a lot more money and eating any profits the renovations might have created. It’s also important to realize that renovations can go over budget (plan to tack 10% to 20% onto your estimated budget to cover unforeseen problems that often arise). Instead of being idealistic about a fixer-upper, ensure you’re certain it’s what you really want so that you’re not suck with a home you don’t want to invest your efforts into. Many people are led to believe they can easily DIY their own renovations in a couple of weekends. Ask yourself if you really have the skills and time. Will you be stressed out by living in a work zone for months while you complete projects on weekends?
Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing a home that needs rehabilitation. The program wraps the purchase and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit as with other FHA loans.