There’s an element of risk in any real estate venture. Sometimes, you buy a property that doesn’t earn the return on investment you’d envisioned. Other times, the vagaries of the market unexpectedly turns a nondescript house in a questionable area into a valuable property. For first-time home buyers, the unpredictability of the market can make becoming a homeowner a daunting prospect. There’s a lot to learn and it’s easy to make a mistake, like getting in over your (financial) head that can put you at a major financial disadvantage. Fixer-uppers represent a significant risk that can pay off handsomely if you have the energy, resolve, and skill to turn one into a charming and desirable home.
Fixer-uppers offer many advantages, including a lower sales price, the prospect of a high resale profit, not as much competition from other buyers, and the opportunity to gain new home repair skills. There’s no concern that your purchase will be contingent on the condition of the market, since a fixer-upper can be a good purchase in any kind of market. Making a purchase offer that’s accepted at an optimal price for a fixer-upper means you’re making money with every improvement. The key is to make certain your new home is structurally sound and the work that needs to be done is well within your capabilities.
No matter what kind of house you buy, always remember that location is the dominant factor of real estate, which is why you shouldn’t buy on a busy street, next to a railroad track, across the street from a school, or near a pollution-emitting manufacturing plant. Always bear in mind your resale opportunities will hinge largely on where you purchase a home. It can take a little doing, but with persistence and the help of a real estate agent who’s familiar with the fixer-upper market, it’s possible to find rehab properties in popular parts of town. Begin by searching your area. When you find such a property, take a close look at surrounding houses to determine whether it’s a neighborhood that a future home buyer would find desirable.
It’s a given that a fixer-upper won’t be in pristine condition, but it’s still necessary to pay attention to the condition it’s in. If there are major structural problems, a roof that’s beyond repair, or a ruined electrical or plumbing system, you may need to call in a contractor unless you’re a very advanced handyman or decide to pass and look for the next opportunity. Bear in mind that a successful fixer-upper project depends on having the right power tools, such as power drills, sanders, jigsaws, and robust handheld tools like mallets, crowbars, and various kinds of hammers. Generally speaking, a three-bedroom home is the best choice for a fixer-upper, as three-bedroom houses are the most popular.
There are plenty of do-it-yourself jobs in a fixer-upper, projects that are well within the abilities of an experienced handyman. You’ll probably face a lot of wall patching, painting, and wallpaper stripping. You may end up refinishing hardwood floors or putting down new carpeting or tiles, and there will be plenty of trim and baseboards to be repaired or replaced.
Buying your fixer-upper
Once you’ve found the right home, it’s time to shop for mortgages. If you’re looking at extensive repairs, it may be best to take out a home renovation loan. If the work needed to be done on the home is more cosmetic and you have good credit, a conventional loan may be the best option. A conventional loan may require as little as 3 percent for a down payment.
Rehabbing a fixer-upper can be a very satisfactory and profitable undertaking. However, be careful not to take on too much if you’re going to make an offer on a fixer-upper. Make sure location, condition, and your skills make it a practical venture.
Our guest blogger Ray Flynn is a civil engineer and co-creator with Bret Engle of DIYGuys.net. Check out their site for amazing DIY tutorials, tips and tricks.