Fixer-uppers can be tempting (especially if you’re an HGTV fan). They let you get creative, put your own mark on the home and, in some cases, even make serious cash when it’s time to sell.
But not all fixer-uppers are created equal. In fact, if you’re not careful about the property you choose, you could end up losing money in the long run.
Want to make sure you’re on the path to fixer-upper success? Here are three signs a home is worth it — and five signs it’s not.
When a Fixer-Upper Could Be Worth It
For a fixer-upper to be worth the investment, you’ll need to consider a few things. First, what’s the potential of the home? Could it be renovated into a highly marketable, attractive property?
If so, you’ll want to gauge the effort and cost it would take to get you there and, ultimately, weigh that against the future value of the house (once all your renovations are complete.) Do you stand to come out on top? By how much? You want to ensure a healthy profit if you’re going to put in all the time and effort.
You’ll also want to look for these promising signs:
- It’s in a desirable location.
A great neighborhood means great marketability once all is said and done. Is the area in demand? Are the neighboring homes nice and well-cared for? What have other homes been selling for in recent months? Use this data to predict what the property might sell for later on down the line.
- The repairs are mostly aesthetic.
You should always, always, always get a home inspection — especially on fixer-uppers. If the inspection reveals only superficial repairs are needed — things like replacing broken doors/windows, repainting chipped walls, or adding some new shingles, then you’ve likely found a good investment. If the issues are deeper (think foundation, electrical, plumbing, etc.), then you might want to think twice. These items will cost significantly more in time, money, and effort to repair.
- You can DIY a lot of the repairs and renovations.
Ultimately, you want to be able to do a good chunk of the repairs on your own, because the more you have to contract out your work, the more it’s going to cost you. Take this into account when evaluating the renovations a property will need, and make sure to get an estimate for any contracting work your projects might require before moving forward with the purchase. Don’t be afraid to get quotes from multiple contractors and make sure you’re getting the best deal.
When a Fixer-Upper Might Not Be Worth It
Every fixer-upper is different, and while there aren’t any hard-and-fast signs that a home is a definite dud, there are some red flags you might want to watch out for.
Some of these include:
- There are lots of vacant or boarded up homes in the neighborhood. This means demand is low and you will probably have a lot of trouble selling the property — no matter how much work you put into it.
- The home has structural issues. If the home inspection reveals serious issues with the structure or foundation, it’s going to be a huge, expensive undertaking to fix. Unless the property has serious resale potential, it’s most likely not a good investment of your time and money.
- You hate the floor plan. While it’s certainly possible to relocate walls, move appliances, and knock out new doorways, these are all very expensive, time-consuming endeavors. If you want to keep costs low, then the fewer floor plan changes you make, the better.
- You’ll need a lot of permits and contractor help to complete the repairs. Permits and contractors equal more expense, so the more you can minimize these, the more cost-effective your project will be. Check with the city to see what permits your planned renovations will require — as well as how much they’ll cost you to acquire.
- There are pests, radon, or mold. If the house has some sort of infestation, a mold problem, or other issues like radon or asbestos on the property, it’s going to cost a good amount of money to address. Always make sure to get a pest inspection, and ask your home inspector if there are any mold problems or other underlying issues you should be concerned about.
At the end of the day, you need to have a clear picture of a property’s condition, necessary repairs, and the total costs it will take to complete them before going through with a purchase. You’ll also want to make sure you have the funds to cover all the repairs (Will you get a renovation loan? Use savings or cash? Put it on a credit card?). You should also be sure you have the time and availability in your schedule to tend to the project.
Buying a Fixer-Upper?
If you’re buying a fixer-upper, we’re here to help. Contact a loan officer at Embrace Home Loans today, and we’ll walk you through your financing options.