4 Rules for Buying a Fixer-Upper as Your First Home
Fixer-uppers are an attractive option for first-time buyers, mostly due to the reduced price tag. As long as you are willing to put in some work, you could have a bigger house in a better location that’s designed to suit your tastes and needs. If that sounds too good to be true, it’s because it often is: fixing up a house comes with considerable risk. If you are thinking about taking the leap, here are four general rules to keep in mind.
Know Your Budget
Before you start looking for a fixer-upper in your area, you need to determine your budget. Start by calculating your budget, which you can do with an online tool such as this one, and then look into your local market. For instance, according to Trulia, the median selling price for a home in Memphis is $122,400.
With these two figures, you can begin to determine what kind of fixer-upper you will be looking for. For instance, if the two numbers are close, something with minor flaws will be within your reach. If you quite a bit away, you will need to look for properties with flaws that are harder to overlook for other buyers.
Look For Ugly, But Functional
That said, whatever your budget, you are looking for houses that are aesthetically unappealing but otherwise soundly constructed. Ugly paint and wallpaper, old and musty carpet, and kitchen cabinets straight out of the 70s are easily changed. Sinking foundations, faulty plumbing, and crumbling walls are not.
This is the difference between a fixer-upper and a money pit. In order to avoid the latter, keep a critical eye when visiting homes and make sure you get a thorough inspection from a professional. This guide from The Balance shows you how to identify a good home inspector from a bad one.
Be Prepared to Use Either a Lot of Money or a Lot of Work
Many people invest in a fixer-upper to save money, only to realize that the repairs and renovations are likely to absorb all the money they saved. According to Forbes, fixer-uppers tend to involve a discount of 8 percent off the market value -- that isn’t too much money in terms of renovation budget.
You can keep costs down significantly by doing the work yourself. You will only need to pay for materials and equipment. Make sure you have all the right tools; as well as power tools such as drills and sanders, you should invest in high-quality versions of simple items like tape measures.
On the other hand, if you do not have the skills or confidence to tackle the necessary DIY projects, be prepared to spend a lot of your house budget on contractors. In Memphis, a handyman will usually charge between $191 and $819 for a project. Ultimately, you need to consider whether this is worth it for you. Buying a fixer-upper that you cannot fix up yourself may not be a good investment.
Hone Your Project Management Skills
Renovating a house is a large undertaking. Before you start putting on some overalls, make a list of every piece of work that will need doing -- it’s best if you make a spreadsheet. Be as detailed as possible (e.g.: “paint bedroom 1 wall” instead of “paint walls”) and list a realistic timeframe and budget for each item.
Once you have your full list, you can start prioritizing. Aside from determining what rooms are most important to you -- for some it will be the kitchen, for others the bedroom -- a good rule of thumb is to start with the bigger, more expensive projects and work your way down.
As long as you follow these rules, you should not run into any catastrophes during your fixer-upper adventure. You will have a home that you have a real connection with, and for many, this is priceless. However, remember that once you have finished renovating your fixer-upper, it could be worth more than you bought it for. You may be able to sell it for a profit and upgrade once again, as long as you stay there long enough to build equity.
Ray Flynn | DiyGuys.net