Does a Fixer-Upper Make Sense?
Purchasing a house for the first time is thrilling, and a fixer-upper can be a great deal. Unfortunately, when it comes to homes in need of repairs, you can quickly get in over your head, both in terms of work and finances. Here is how to decide if a fixer-upper is right for you.
Do you have the funds? How do you plan to finance your purchase? Houses are expensive items in the first place, and it’s important to understand traditional mortgages are for the house as it is and aren’t designed to finance repairs. The FHA offers a couple of mortgage options for remodeling, and there is a Fannie Mae HomeStyle Renovation mortgage. You’ll need to get estimates for any work you won’t do yourself, and as for any loan, you need to qualify financially. Whatever work you plan to do yourself will mean having certain tools in your workshop, too. Sanders, drills, jigsaws, and the like are only the beginning when it comes to supplies you need for repairing a house.
How handy are you? Before jumping into a fixer-upper of any kind, you should make an honest evaluation of your abilities. Do you have a knack for putting things into good working order? Do you enjoy strapping on a tool belt to spend your time off on projects, or would you rather be out shopping or at the movies? Bob Vila points out that if you don’t enjoy spending your downtime lingering over a DIY, a fixer-upper is probably not your bag. You might need help with making some repairs, even if you’re handy. Some people have a close friend or relative who can help guide them through the process, which can make a big difference in success and in finances. Keep in mind some repairs such as wiring and plumbing are best left to professionals. When it comes to hiring contractors, some experts recommend being especially careful in selecting who you hire. Do your research and check references carefully. Another option is to hire a local handyman for smaller repairs. In El Segundo, you’ll spend $638 on average to hire a handyman.
How bad is the property? When you start shopping for a fixer-upper, you’ll find there is a wide range of properties fitting the description. HouseLogic explains sometimes homes are structurally unsound and will require the assessment of an engineer and demolition work. Those homes often require a substantial amount of time, labor and money before you can even move in. You will want to talk through the repairs with a professional to address the worst issues first such as a leaky roof or foundation repair. However, if a house needs cosmetic repairs, you can often move in and spread your remodel over a period of time. Homes that require updates can be your best deals, since installing new carpet and replacing light fixtures can be done whenever time and money are available. Dave Ramsey recommends hiring a home inspector before purchasing any fixer-upper property to make sure your assessment is realistic. The national average cost of hiring a home inspector is $315.
Stay or sell? If you’re considering investing in a fixer-upper, you should think about your overall motivation in doing so. Are you looking at a property to keep indefinitely, or do you want to resell it to make money on your investment? Selling a home for profit can be tricky, especially if the housing market dips. Some locations hold value well, but you should research housing values carefully both in the neighborhood and overall area. You also need to tally in the amount spent on bringing the property up to condition for selling it. On the other hand, for a rental home you want to keep in a location you like, the purchase could be the perfect solution.
Dream home or nightmare? A fixer-upper can be the perfect investment if you’re the right buyer and it’s the right property. Do some research and soul searching before jumping in. Think about how much you’re ready to commit in terms of finances and sweat equity and decide if a fixer-upper is right for you.
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