It’s hard to tell in advance if a fixer upper is going to turn into the best investment you have ever made or a money pit with an endless list of necessary repairs that will break the bank. Undeniably, there is a certain risk, but if you keep your eyes wide open and pay attention to certain things, you are likely to land a decent home. Let’s take a look at the basic rules that can help you make the right decision if you are thinking about buying a fixer-upper. After all, it could be a wise investment, especially if you are home shopping on a tight budget and can’t afford higher price ranges.
Stay Objective And Don’t Overestimate Yourself
If you are looking for a fixer upper, you are probably aware that it will take a lot of work to renovate the place and turn it into a cozy home. In reality, though, you will need to know exactly how much work, money and time it is going to be. Of course, that will depend on the condition of the home and whether it will need just a few upgrades or a full-scale top to bottom renovation. Just be honest with yourself about how much work you can realistically carry out and pay for. To assess the situation, you will need the opinion of a home inspector.
The Home Inspection(s)
A home inspection is recommended anyways but particularly for homes in need of major repairs. It’s one thing what you can spot with the naked eye, but a completely another what else might be there under the surface. If the home is in really bad shape, one inspection might not be enough to cover all the different aspects of the home, so you’d have to rely on multiple experts to get detailed information. The inspection report(s) will reveal if there are any structural problems and which repairs are mandatory. You should ask for a cost estimate for individual repairs to get an idea of how much it would cost you. Make a list of fixes that have to be completed before moving in and the ones that can be done later to be clear on whether it’s feasible with the budget you have or not.
You will have to check with the lender how much they are willing to give you based on your specific situation and finical standing. One advantage is that they take into account the future home value when deciding on the loan amount, so if the home is in a great neighborhood, you may be able to cover all repairs with the loan.
Future Home Value
How much your home will be worth in the future depends on the potential of the neighborhood. Take a closer look at the homes and properties and how well they are maintained, as well as the prices of currently listed homes (which are not necessarily fixer-uppers) in the community. If the prices tend to be relatively high compared to the average, the value of your home will probably significantly increase in the coming years, which means your investment will generate high returns.