While it’s widely acknowledged that purchasing a house can be a costly endeavor. But there’s an alternative path for those willing to invest effort. A survey this year was revealed that 59% of first time homebuyers are actively considering fixer-upper or more modest starter homes. However, the transformation of a shabby property into your ideal living space involves more than just a fresh coat of paint. Carelessness in the renovation process, such as tearing down load-bearing walls, can lead to significant unforeseen expenses. For those exploring the fixer-upper market, determining whether the investment is worthwhile involves careful consideration of both effort and financial aspects.
What is a Fixer-Upper?
A fixer-upper refers to an older home in need of significant repairs and renovations to become suitable for habitation. It is available at a lower purchase price because of the major maintenance work. Such properties often present a lot of challenges, encompassing both financial and logistical aspects. Nevertheless, the potential rewards can outweigh these obstacles.
Schedule a Home Inspection
Investing in a home inspection may be an expense, but it is an essential step when considering to buy a fixer-upper. A qualified home inspector conducts a thorough examination of the property, providing a detailed report outlining necessary repairs.
Without a home inspection, critical issues such as the need for new plumbing, septic tank replacement, or foundation cracks might go unnoticed. A home inspection serves as a preventive measure. It helps you steer clear of unforeseen surprises and enabling you to budget for and prioritize necessary projects.
Prior to finalizing the purchase of a fixer-upper, consider engaging in a specialized home inspection to obtain a comprehensive report on the property. In addition to a standard home inspection, here are key assessments to contemplate:
If the home has experienced damage from pests such as termites, ants, or beetles, addressing these issues early can prevent significant complications in the future.
Conducting a sewer line scope and septic tank inspection is crucial, especially for older properties. This helps identify potential repair or replacement needs in advance.
Employing thermal imaging, a home inspector utilizes infrared light technology to detect issues that may not be visible to the naked eye. This includes pinpointing heat loss, air leakage, insufficient insulation, moisture damage, and abnormal electrical components.
Calculate the Costs of Renovations
When purchasing a fixer-upper, it’s essential to ensure that you can feasibly transform it into your envisioned space. Develop a comprehensive list of all planned projects and calculate the costs of materials and labor (if contractor services are necessary).
Conduct thorough online research and obtain quotes from contractors to establish a ballpark estimate. While it may not provide an exact figure for every aspect, this approach enables you to budget effectively and assess the overall investment’s viability.
For a precise estimate of the repair costs associated with the particular fixer-upper you’re considering, it is advisable to get the services of both a home inspector and a contractor. These professionals can provide insights into the necessary repairs and associated expenses. Alternatively, if you prefer not to manage the project independently, hiring a contractor to oversee the entire process is an option. Though this typically incurs an additional fee of 10% to 15% of the total renovation cost.
Check Whether a Permit Is Necessary
Certain renovations may necessitate permits, and the specific requirements can vary based on your home’s location. In many towns and cities, permits are typically required for the following:
- Structural work
- Window installation
- Room additions
- Sheds and garages
- Plumbing and electrical work
To acquire a permit, you can either visit your municipal government office online or in person. Depending on the complexity of your project, you might need to submit detailed plans as part of the application process.
Pros and Cons of a Fixer-Upper
Reduced initial cost: Despite the additional expenses for renovations, a fixer-upper typically comes with a lower list price and a more affordable down payment requirement, either calculated as a percentage or based on the lower property value.
Lower competition: Fixer-upper homes generally face less competition in the market, increasing the likelihood of securing the desired property at a favorable price.
Personalized customization: Acquiring a fixer-upper grants homeowners the freedom to customize their living space according to their preferences. Whether it’s remodeling the kitchen, adding a deck, or expanding living areas, the possibilities are extensive.
Control over quality: Opting for renovations affords you complete control. You can select materials, colors, contractors, and every other aspect, ensuring the quality and style meet your specific preferences.
Costly renovations: Depending on the extent of the renovations, you may find yourself barely breaking even or even spending more on the fixer-upper.
Challenging budgeting: While you can crunch the numbers and estimate renovation costs, arriving at an exact figure is nearly impossible. Unforeseen expenses are bound to surface.
Unanticipated challenges: Even with a thorough inspection, unexpected issues are likely to emerge, especially in older houses.
Extended construction period: Unless you relocate during the renovation process, living in a construction zone becomes inevitable for the entire duration of the project.
Initially, a fixer-upper might appear as an irresistible opportunity. However, as you grasp the extent of required repairs and renovations, your perspective may shift. Before committing to a fixer-upper by making an offer, conduct a thorough assessment to ensure it genuinely stands as a worthwhile investment.
Fixing an older home can be enjoyable, provided you don’t take on more than you can handle. Seek guidance from a professional to ensure you’re not committing to a project that could become overwhelming. With the appropriate fixer-upper choice and a prudent financial strategy, envision yourself enjoying a stress-free morning coffee in a new breakfast nook within just a few months.