Buying a fixer-upper is fun for many people. The mere thought of turning a rundown home into something beautiful is exciting to them. But, is it always a good deal? Not every story has a happy ending. Remember, your financials are at stake here too.
So how do you know if it’s a good deal?
Find a Good Inspector
The first thing you should do is get a good inspector. Find someone that is well versed in the area you want to buy. Ask around about the inspector’s reputation. You want someone honest, but who will pay attention to the areas of utmost concern.
Because you are buying a home that needs fixing up, you need to know the truth about the home. You want to know everything that is wrong so you can know the true cost. The cost of the renovations will play a vital role in your decision in the end.
Figure Out the Future Value
This step is a little tougher. You need to know how much the home will be worth post renovations. The easiest way is to find comparable homes in the area that sold recently. Are they in good condition? If so, what did they sell for?
Next, you must come up with the cost of the renovations. The closer you get to an actual value, the better. This is why a good inspector is so crucial. You should have a good idea of everything that needs repairing.
Last, compare the cost of the renovations plus the cost of the home to the future potential value. You want the amount you pay to be less than the future value. Only then can you tell if it’s a good deal. Ideally, you want to see equity. Just how much equity is a personal decision, though.
Find a Fixer-Upper That Needs Cosmetic Repairs
The best deals are homes that only need a little TLC. Chipped paint, overgrown landscaping, and neglected floors offer the best deals. They are inexpensive to fix yet provide a great return on your investment. Sometimes you have to look past the wreck and see the home for what it’s worth. This is where the advice of the inspector really helps you make a decision.
Check Out the Area of the Fixer-Upper
Don’t make the mistake of focusing only on the home. You could make the home look incredible, but if it’s in the wrong area, it will not matter.
Check out the immediate neighborhood. Are the homes all in good condition? If you fix up a home in a neighborhood of run-down homes, it won’t matter. Instead, if you found one run-down home in the midst of many well-kept homes, you may have a winner.
Go beyond the neighborhood and check out the schools. What are the school’s reputations? Do parents want their kids going there? If it’s not highly desirable, investing in a home in that district might not net you the profit you had hoped.
Does the Fixer-Upper Have the Layout You Want?
Don’t make the mistake of going into a fixer-upper thinking you can completely renovate it. You should love the layout as is. If not, you will sink much more money into it than you will see in return. Knocking down walls, adding rooms, and changing the floor plan is time-consuming and costly.
Look beyond the state of despair and look at the home’s functionality. Does it have enough bedrooms and bathrooms? Do you like the layout of each floor? Don’t settle. You will only regret your decision down the road and end up sinking more money into it to make it what you want.
So the answer to the question “is that fixer-upper a good deal?” is a personal decision. One person might see the true beauty and function of a home and buy it. Another may look at it and think there is no way they could make it work.
Take your time and go through every step of the process. Use the advice of professionals too. Don’t try to do it all on your own. Let the people who are experts in specific areas help you understand the true impact of buying a run-down home. It is only then you will make the decision that works for you and your financial situation.