Buying a fixer upper is surely glorified in today’s world. HGTV has countless television shows that detail how real estate investors buy, fix, and re-sell homes as well as renovation programs that show how a home that needed a ton of repairs was “easily” fixed to look like a polished paradise.
Buying a house that needs work can come with a number of benefits. Those selling a home as-is will often take a lower price, saving you some money. A distressed property also gives you the chance to renovate it how you please, creating the perfect home for you.
But… spoiler alert! It’s actually a lot harder than many of these television shows let on. So whether you’re an inspiring real estate investor, a house flipper, or a homebuyer just looking for a good deal, keep reading.
We’re going over four things that buyers need to know about buying a fixer upper. Let’s get started.
1. Understand the Issues… All of the Issues
Before you enter into a deal, it’s important to understand the extent of the problems, repairs, and renovations that the home will require. Not only is it important to understand the issues the home has, but it’s also important that you know the extent of these issues.
For example, let’s say you notice that the paint in one of the bathrooms is peeling. This could be a simple & inexpensive fix with a fresh coat of paint. But, it could also indicate serious water damage in the walls of the bathroom, which would require more major (and more expensive) repairs.
Take the time to itemize everything that needs to be done in the home to evaluate whether you have the time, budget, and/or motivation to get it all done. You can do this yourself, by asking the seller, getting a home inspection, or speaking with other real estate experts that have worked with selling & buying these types of properties.
2. Mortgage and Loan Options
When buying a home with the purpose of repair or renovation, you open up many more mortgage and loan options for yourself. Renovation loans are special types of mortgages that allow you to finance the property while simultaneously financing the renovations & repairs for that property.
This can help fund improvements & repairs with lower interest than many other types of loans, and it gives you more funds to repair the home that you might have saved up yourself.
Here are a couple of options for renovation loans:
- FHA203(k) Loan: Funded by the Federal Housing Administration, this is one of the more accessible renovation loans available. Less stringent qualifications mean that people with lower incomes and credit scores can still be approved and applied to most renovation & repair projects.
- HomeStyle Loan: These loans can be used to purchase and renovate investment properties, residences, second homes, and more. The down payment on the loan will depend on your financial situation, but many find that these are also quite accessible and widely applicable to a number of projects.
Need help navigating the world of fast home sales & distressed properties?
Growing Edge Properties has years of experience working in this industry and helping others get involved. Learn more here.
3. Be Realistic About Your Budget
Now that you’ve evaluated the issues with the property and have (hopefully) secured loans or mortgages, it’s time to break down your budget.
Of course, we all want to make awesome renovations and repair everything as fast as possible. But you need to be realistic about your budget.
How much can you afford to put into the house after you’ve already spent a lot of money purchasing the home? What are your “must-dos” and what are your “nice to haves”? What needs to be repaired first, and what can wait until later?
You’ll also need to factor in all of the various expenses of buying a fixer upper. Some things include:
- Any interest, loan payments, mortgage payments, taxes, etc
- Major repairs (appliances, plumbing issues, electrical problems, roof replacement, etc)
- Minor repairs (painting, counters, flooring updates, deep cleaning, etc)
- Other lodgings during renovations
- Moving costs
- Payments to real estate agents, lawyers, contractors, and repair people
4. Prepare to Be Patient
You’ve found the perfect home to buy as is. You’ve outlined your budget, you have a game plan, and you’re ready to get this project completed.
That’s great… but be prepared for it to take a good chunk of your time & effort. Those of us in real estate know better than most how timelines and budgets easily go over with a majority of projects.
Depending on the home, you could be looking at anywhere between months to years of repairs and renovations before the project is complete.
Prepare to dedicate yourself and a large portion of the future to the project. Prepare yourself to go past your timeline & budget.
Buying a Fixer Upper? Work with the Experts for the Best Results
Buying a house that needs work is a much bigger job than many people realize. Between actually buying the home, understanding the problems it has, and working on the repairs & renovations, buying a fixer upper is a long process.
Make this process easier and much less stressful by working with a professional.
Growing Edge Properties has experience on all sides of the real estate coin: cash home sales, buying a home as is, off market sales, and more.
Contact us to gain a partner that will help guide you towards your real estate goals.