Everyone has seen the movies where the sloppy boy or geeky girl in high school gets a makeover and becomes the most popular guy or girl in school. The same logic should follow for that house that has “good bones” and just needs a little magic to transform it into the hottest house on the block, right?
We all have dreams of finding that diamond in the rough home and that can sparkle and sell for much more than we paid for it with a little TLC. Many people make a good living that way, in fact, but that’s not the case for everyone who invests in a fixer-upper home.
A fixer-upper can be a tremendous boon to your wallet, but that’s only when everything goes according to plan. Though sometimes a small change can make all the difference, investing in a fixer-upper does not always have a happy ending.
Purchasing a fixer-upper is a risky investment unless you are absolutely certain of the investment that will be necessary to create the home you intend to inhabit, rent, or flip for profit. Unfortunately, it may be difficult to accurately gauge the needs of the home until you start renovations.
Uncertainties like this are what make fixer-uppers both enticing and dicey. If you are on the fence about whether or not you should invest in a fixer-upper, there are some questions that you need to answer before you consider buying.
- Is the problem with the home purely cosmetic or is it structural as well?
- Can you afford to fix this house?
- Do you have the time to invest in turning the house around?
- What do you intend to do with the house once the renovation is complete?
- Will this be your first home?
- Cosmetic or Structural?
Some homes require only cosmetic repairs, like a fresh coat of paint, new carpeting, or a good landscaping job to turn them from ugly to attractive. Other fixer-uppers may have more serious structural issues that require contractors, electricians, plumbers, and other expensive renovations to get them up and running.
It is important to have a thorough inspection of the property done and a complete report generated before you decide to purchase the home.
You have likely heard the term “money pit,” and fixer-upper houses are where the term comes from. A money pit is a house that costs more to fix than it can potentially sell for. By speaking with financial advisors, your realtor, and getting a home inspection, you will be in a better position to map out what you can reasonably afford to invest in both the house itself and the renovations.
Affordability goes beyond your financial investment. Affordability extends to whether or not you can afford the energy and effort it takes to turn that house into a habitable and profitable home.
Renovations to a home can take anywhere from months to years to complete, and you need to know what your time commitment would be before you invest. For DIY fans, this might be a great idea, but if you are a person with little free time to give to your investment, you may want to rethink a fixer-upper.
What’s After the Renovation?
If you are interested in inhabiting the home after you fix it up, you will likely have a personal investment in the property that goes beyond money. If you intend to use the home as a rental property, a fixer-upper can be a great opportunity if you can afford the time, money, and effort that it takes to make the home profitable.
First home or Next Home?
Pretty much any expert home flipper would agree that your first home investment should not involve a structural renovation. Should you choose to invest in a fixer-upper your first time out, you will need to be prepared to take on the financial, time, and energy costs associated with the renovation.
Even in the best of circumstances, renovating a fixer-upper can be stressful, so be sure that you have a solid support system in place before you tackle the project. Investing in a fixer-upper can be very rewarding, so long as you take the time to plan ahead, consider your investment wisely, and have the time to see the project through to the end.