Are you thinking about investing in a "Fixer Upper"?
Take a look and see if it is right for you!
For people who love old houses — and love to work on them — the notion of buying a fixer-upper can be irresistible. Just think: You can snag a rundown place in a good neighborhood for way below market price, invest some time and money renovating it, and end up with a like-new house that's worth at least twice what you paid for it. Sounds good, right? Often, it is. But buying a fixer-upper can be fraught with peril. So before you take the plunge, make sure you have a realistic idea of what you're getting into.
Do the Math
Figuring out what you should pay to buy a fixer-upper starts with a simple equation. First, add up the costs to renovate the property based on a thorough assessment of the condition of the house. Be tough with this estimate, which should include materials and labor — yours and other people's. Next, subtract that from the home's likely market value after renovation, drawn from comparable real estate prices in the neighborhood. Then deduct at least another 5 to 10 percent for extras you decide to add, unforeseen problems and mishaps that have to be dealt with, and inflation. What's left should be your offer.
Pick Projects That Pay
The ideal fixer-uppers are those that require mostly cosmetic improvements — paint touchups, drywall repairs, floor refinishing — which generally cost much less than what they return in market value. New lighting fixtures, doors, window shutters, and siding, as well as updated kitchens and bathrooms, are also lucrative improvements.
Be Prepared to Roll Up Your Sleeves
Whatever renovation is required, it's usually most cost-effective when homeowners pitch in. If you're not the hands-on type, be prepared to devote a considerable amount of time — months or even years — to closely supervising contractors. But remember that all of your financial gains could be wiped out if the project goes over budget because of mistakes or unnecessary delays.
Line Up The Money
One of the most challenging aspects of purchasing a fixer-upper is paying for the renovation. Understandably, most people don't have much extra cash after making the down payment and paying closing costs, so coming up with additional money to cover repairs or remodeling can be difficult.
By: Jeffrey Rothfeder This Old House magazine