Happy Friday and Happy Memorial Day Weekend! Ever thought about making a fixer upper your first home? Many first-time homebuyers have and although it can be a lot of work, it can also be a fantastic investment! Our guest blogger today, Ray Flynn, from DIY Guys has written a very detailed and helpful article that I am happy to share with you today. Enjoy and have a fun, safe weekend!!
If you're willing to put in some sweat equity, a fixer-upper home is a great opportunity to stretch your home-buying budget. Fixer-uppers can cost tens of thousands less than move-in ready homes, allowing first-time buyers to purchase in their neighborhood of choice without taking on an oversized mortgage. However, it’s important to know what you’re getting before you buy. If you’re thinking about buying a fixer-upper, here’s what you should do.
It's easy to get swayed by the potential of a home, but not every fixer-upper is a good deal. As KeyBank points out, if a home isn't structurally sound, rehab costs will eat up whatever money you saved by buying a fixer-upper. Avoid purchasing homes with foundation issues, plumbing problems, or pest and mold infestations. Instead, shop for homes that primarily need cosmetic improvements, like repainting the exterior and ripping up old carpet.
Opt for Inspections
Don't expect to notice structural problems yourself. Many serious issues are hard to spot unless you've been trained to do so; that's why a professional inspection is so important. Generally, the inspection happens after you make an offer but before closing on the house. Include an inspection contingency on your offer so you can back out if the inspection reveals problems you're not up for dealing with.
Keep in mind that a general home inspection doesn't cover everything. As The Balance explains, a home inspector is a generalist; he or she can recognize many problems, but often will refer you to a specialist for further assessment. Problems you may need a specialized inspector for include pest problems, radon, lead, asbestos, mold testing, and chimney issues.
Do the Math
Once inspections are complete, you should have an idea of what work a home needs. Now it's time to get quotes and learn how much each project will cost. For improvement you plan to DIY, add up the cost of materials and tools you'll need to purchase. If you don't already own them, expect to spend money on power tools such as a drill, sander, and various power saws. Avoid buying the cheapest tools on the market; spending more for a quality tool spares you the frustration of a breakdown mid-project. For jobs you'll need to hire out, get quotes from several contractors, and budget for the highest quotes you receive. While the actual price may be lower, it's smart to build a buffer into your budget.
If the cost of a fixer-upper plus renovation expenses exceeds the price of a comparable move-in ready home, reconsider your purchase. In order for the time and labor of remodeling a home to be worth your while, it should offer savings over a turnkey home.
Know Your Financing Options
If you pay for renovations in cash, it could be years before your home is fully remodeled. Thankfully, paying out of pocket or putting it all on a credit card aren't your only options. You can roll renovation costs into your mortgage with a FHA 203(k) loan or Fannie Mae HomeStyle Mortgage, apply for a zero-interest home improvement loan through your county, or tap into your equity to finance the remodel.
Pick a Starting Point
Once the financials are out of the way, you have another big question to contend with: Where to start? Assuming the home is structurally sound and safe, start with simple projects that have a big impact on your home's livability. In addition to redoing the master bedroom and painting interior walls a neutral, modern hue, consider making the front landscape a priority project. A little curb appeal goes a long way when it comes to feeling proud of your home. It also signals that your home is occupied, which may be important for security reasons if your home spent much time vacant before you bought it.
Finally, make sure you're up for the task of remodeling your own home. Transforming a fixer-upper into your dream home is a labor of love that requires many evenings and weekends spent on projects. As long as you're up for the challenge, rehabbing a fixer-upper is a great experience. But if you're not one to get your hands dirty and find creative solutions to problems, move-in ready is a better choice for you.
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