Buying a Fixer Upper
I am a sucker for a remodel. An old house that needs improvement trumps new construction any day! Remodeling and renovating is not for sissies. It’s stressful, full of unknowns, and potentially way more expensive than originally planned. But I can’t help myself! Maybe you can’t either.
Fixer uppers are not just for crazy, creative people like me. They are for the budget-minded and investors, too. How do you find a good one that will save you money and give you a good return on your investment (ROI)?
Tear it down
When I was in real estate, I saw some shabby homes listed as ‘fixer uppers’. They were so bad, we called them ‘knocker downers’. Unless the land is worth a LOT of money, which is not usually the case, pay no attention to these. Things you might notice are crumbling or cracked walls, evidence of flooding or other water damage, an uneven roof, settling in the foundation, and mold, among other things.
Always get a seller’s disclosure before you make an appointment to see any home. It can be very telling, if the sellers are honest. It should be clear to stay away from it, unless you want the land, like I said.
A mild fixer upper just needs cosmetic work. It is structurally sound, but no one has done anything to it for maybe decades. You can get away with fresh paint, modern lighting, new appliances, landscaping, floor refinishing, new carpet, and window and door replacement – things that are visible.
Many of these projects are for the DIYer, and the ROI is high. That’s a good thing if you need to save money on buying a house, or if you want to buy it and flip it, or fix it up and rent it out. These noticeable improvements are what buyers will see, so they are very valuable.
When I remodeled in 2007, I replaced all the plumbing from the well and in the house, and the bathrooms and kitchen got all new fixtures. When I listed the home in 2010, no one cared. It was not the selling point I thought it would be. Buyers looked at the new paint job, the new windows, new tile floors, the landscaping and the new sun room. I was surprised! I would jump on a house with all new plumbing!
A different kind of fixer upper has no structural issues, but needs a major overhaul. A new roof, new HVAC, bad traffic flow with an outdated floorplan, tiny rooms, and outdated kitchen and bathrooms are in this category. The yard is probably overgrown and unappealing as you drive up, too. Walls need to be torn out, plumbing redone for kitchen and bathroom – this can be as big or bigger than new construction.
When my next door neighbor died, I listed and sold her house. The man who bought it wanted to flip it. He figured he’d take out the small downstairs rooms to make a nice living/kitchen area. A large master bath was planned for upstairs, and a downstairs bathroom was sacrificed to make a utility room.
The best materials were chosen, but when he dove into it, the house had to be completely rewired, a new heating system had to be installed, and a new septic system had to be put in to bring the house up to code. He wasn’t counting on these extra expenses, so by the time he was done, he had spent too much to sell it for a reasonable price. It was a rental for several years before they dropped the price, lost a bunch of money, and finally sold it.
Inspections and contractors
Always get a thorough home inspection, preferably by someone who has been a builder. Many contractors retire and do inspections (much easier on the body!). When you get recommendations on work that needs to be done, get estimates from several contractors. You may even need an engineer’s inspection for structural and geologic issues.
Crunch numbers with your down payment, the cost of the house, the cost of repairs, and the approximate value of the house when the work is done. Expect hidden expenses, so tack on 10% or more to cover them. If you buy a house for $200,000, put $40,000 into it, and have a $300,000 home, you’ve done well!
Never overbuild for your neighborhood. Remodel so the house is similar to others. My neighbor had $400,000 into his remodel. That’s 100K more than any house in the hood!
The final joy
Remodel with energy efficiency in mind. Consider sunny windows, more insulation, solar panels for electricity and water, native landscaping, and sustainably acquired materials. Save money and natural resources.
Renovating is gratifying! It’s stressful, and relationships suffer from any type of construction, but in the end, you should have a home that has saved you a few bucks or that you can make a few bucks on in a sale or renting. Good luck and have fun!