Buying an Old House to Fix Up
So you've always been a tinkerer or a crafty person, and you've dreamed of buying a nice, old, dependable house that you can fix up and make your own. Or maybe you're a handy person and you want to save money by buying a fixer-upper and restoring it yourself. There are a few things you need to keep in mind when traveling down this road.
1. Always remember the neighborhood. Pick a fixer-upper that is in a good location. It will help the resale of the house should you decide to sell. You're already slashing the price by buying a house that's in less than pristine condition, so don't skimp by living in an area you're not comfortable with.
2. Make your offer contingent on a house inspection. A good house inspector will give you a list of needed repairs, and will tell you which ones are emergencies. Is the heater leaking carbon monoxide? You'll need to fix that before you even move in. If you make your offer contingent on the inspection, you can walk away if the house requires repairs outside of your scope of expertise or your budget.
3. Select houses that need mostly cosmetic repairs, especially if you're doing the work yourself. These are repairs like replacing the carpets, fixing the drywall, updating the cabinets and appliances, or new paint jobs. If you want to resell the house, these types of repairs don't cost much but will significantly raise the house's value.
4. Consider your time. Do you need to move into a new house soon? A fixer upper probably isn't for you. If the house you select needs structural repair or anything other than cosmetic updates, it could be months before it's move-in ready. If you're set on a fixer-upper, start the process of buying one several months or a year before you want to move in.
5. Don't skimp on the math. When you calculate the price of a fixer-upper, include the purchase price, insurance and taxes, fees, cost of renovations and repairs (including labor and supplies), plus an additional 10 percent for unexpected expenses. When calculating your purchase price to begin with, you will subtract the cost of renovations plus 10 percent to make your offer.
6. Avoid fixer-uppers with major necessary repairs. Houses with foundational issues or those that need plumbing or electrical systems overhauled will be very expensive. The cost of structural repairs like these generally isn't recouped in the house's value. You won't make your money back when you resell, and most of these types of repairs are beyond the expertise of even the most handy house buyer.
7. Don't over-improve the house. Over-improving the house might make it more expensive than the other houses in the neighborhood, which could make it almost impossible to sell in the long run. You'll probably take a hit on the sell price when you move out.
8. Pick a house that already has a great layout. Whether you want to live in the space or sell it, it should have a layout that's attractive to a buyer. Four bedrooms is ideal, as is more than one bathroom. When you walk through, does the room flow make sense? Is the kitchen big enough? Are the bathrooms in the right spots? Are you going to have to knock down walls to make the living room big enough? Those are expensive repairs, and mighty time consuming.