Is A “Fixer-Upper” In Your Future?

Do you love older houses and doing home improvement projects?  Perhaps you’re tempted to buy a “run-down” house in a great neighborhood so you can fix it up.  Maybe you’ve admired the architectural lines of a house and would love to restore it to its former beauty.  Whatever your motivation, take care to protect your interests.
Many buyers tell their real estate agent they are looking for a fixer; a property they can renovate to save money.  What happens very often is that buyers aren’t prepared to deal with hidden defects in a property that will cost far more than they intend to spend. 
If you are a do-it-yourself (DIY) person, don’t be unnecessarily dissuaded by a big job. The number of buyers seeking turn-key homes is high which decreases competing offers for homes requiring repairs.  Evaluate the risks involved before making a commitment and be careful to keep emotions at bay.  There have been many polls taken and tips given about how to buy a fixer, but it really comes down to a handful of best practices.
Understand Market Value
Talk to your real estate agent about the area you’re thinking about buying in.  They will explain how homes are evaluated and compared to determine market value.  In order to achieve the desired price point once renovations are complete, you want to secure a property significantly below the current market price; that is, buy low – renovate – sell high, or keep it.
Be cautious not to over-improve the property.  Your renovated home value should end up comparable to the median home values in your neighborhood.
Investigate Property Condition
Even if you are well versed in construction aspects, it is wise to bring a home inspector or a building contractor with you to evaluate a property.  This can often be done before you make an offer.  This step can also help you avoid going through the expense and frustration of having to exit your project down the road.
Major repairs including foundations, the structure or in systems such as electrical and plumbing require substantial resources.  Be sure you understand the scope of work you are facing before making a commitment.
Secure Financial Resources
Regardless of how you choose to finance your project, make sure you secure more than your repair budget.  You will need contingency funds both for the project itself and where you will live while work is underway.
There are many ways to finance your endeavor; some offer a better return on your investment than others.  Consider your financial options including cash, credit cards, personal loans, home equity lines of credit and first mortgage renovation loans.  Be sure to seek advice from a financial advisor if you need another opinion.
Have A Trusted Resource Team
Even if you are very handy and skilled in your work, you’ll need advice, materials, inspections and perhaps even labor from others.  Draw out your plan and form relationships before launching your project.  By forming your resource and support team early, you form a stronger foundation for success.
Know Your Limit
Clearly define “fixer” at the outset of your search.  A cosmetic project including fresh paint and carpet with minimal repairs is far different than a major renovation.   Each type of upgrade comes with its own set of investment in terms of finances and time.
Identify risks so you can take steps to mitigate negative aspects or avoid them altogether.  Each risk should have an exit strategy allowing you to change course, even if that means delaying completion or making other plans.
Real estate professionals stand ready to offer advice and assistance in making your real estate goals achievable.  Consult them early and often when evaluating your options.
As always, let’s foresee the possibilities . . . and get results.