For every TV show where they take an old run-down house, slap on some shiplap and subway tiles and transform it into an amazing place, there’s also a show or movie like “The Money Pit” where it all ends comically badly. Sure, it’s tempting to see a place with good “bones” and think “go for it.” After all, you could get a house for a steal, make it your own or even flip it. But before you begin that hunt for a diamond in the rough, you need to carefully look at the yin and yang of it all. Here are a few steps you should consider before you take the plunge:
“Comp” it Up
There’s a popular saying that you should always try to find “the worst home in the best neighborhood” which does have a certain ring of truth to it. After all, you can fix up a home, but you can’t change its location. An ideal fixer-upper will be in a desirable neighborhood. If property values are struggling in the area, you might be left with buyer’s remorse.
Many experts agree that a good way to determine whether a fixer-upper house is worth the money is to look at comparable homes (known as real estate comps) in the neighborhood. Then, factor in the estimated cost of renovations to the purchase price. If it still appears you’ll be making money on the home, it’s probably a worthwhile investment.
Get a Home Inspection
While the fixer-upper of your dreams might look great on your Excel spreadsheet, it can also be a huge money pit if you estimate incorrectly. A home inspection helps you avoid unpleasant surprises as well as budget for and prioritize projects even before you commit. Yes, this will set you back a few hundred dollars, but we consider it an absolute must for a fixer-upper.
After inspecting your home top to bottom, an experienced inspector should be able to provide a detailed report covering all the repairs or upgrades it needs. If you really want a comprehensive overview, you might also spring for a visit from a licensed exterminator as well as septic tank inspector if the property isn’t linked to a sewer system.
Weigh the Pros and Cons
Now that you have an idea of your potential fixer-upper’s overall condition, the desirability of the surrounding neighborhood and what needs to be done to get it up to code, it’s time to decide whether it’s worth the time and effort to dive in and do it. Here’s are some things to think about:
Can You Afford It? With a fixer upper, you’ll no doubt run into some hidden costs you didn’t anticipate. Make sure you have enough in your budget to cover not only repairs and renovations you already know about, but also give yourself an added contingency of about 20% to absorb any unforeseen expenses. Create a list of must-have improvements and get estimates from contractors to determine what they’ll cost. If the numbers are higher than expected, you’ll want to adjust your offer price accordingly.
Are You Really a DIYer? Sure, you’re a wiz at hanging pictures, but do you see yourself wrestling with sheetrock and pulling up roof shingles? Unless you’re highly handy, a fixer-upper will require hiring contractors to handle repairs and updates. Consider your own abilities and factor them into the level of help you’ll need. If you’re even considering a fixer-upper, simple tasks like painting walls or refinishing cabinets should already be in your wheelhouse. Plumbing, electrical work and major structural issues are best left to the pros. Make a list of what you can do yourself and what you’ll need to outsource. And before you hire a contractor, get at least three qualified quotes to give you a better idea of the local market rate.
What’s Your Timeline? Transforming a fixer-upper can take months or even years. If you’re looking at a place that only requires a few cosmetic tweaks, you can probably move in fairly quickly and live “around” the areas of your home being renovated. For a fixer-upper needing major renovations, this may not be practical. Our advice? Take the information and estimated timelines you’ve already gathered from contractors and other outside help, factor in the skills you bring to the table as well as the time you realistically can spend each week on the project. Then, develop a realistic “master timeline” for how long improvements will take. If it starts looking endless and overwhelming, either re-set the timeline or move on. Check out these tips for keeping the momentum going.
Are You the Fixer-Upper Type? Some people can thrive in apparent disorder and chaos, while others freak out if there’s anything slightly askew. Take an objective look at the investment you’ll be making, what will be involved, the time it will take and whether you’ll be comfortable dealing with shifting parameters, unexpected frustrations and the occasional setback. Make sure you go into the process with realistic expectations and stay focused on the potential reward. Look for ways to relieve stress, including planning fun weekends away from the chaos. The journey to your dream home might be rough at times, but in the end, it could be well worth the money, sweat equity and effort invested.
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