How to Get the Fixer-Upper You Want
An oldies but a goodie: That might be just what you’re looking for when buying a home. You’ll get a lower price and excellent resale value once you’re done with renovations … if you do it right. Do it wrong, and you may be looking at the worst mistake of your life. Here’s how to avoid that.
Understand the Process
Mortgages, agents, inspections, appraisals, offers and closing — buying a home is confusing, especially if it’s a fixer-upper, so research how it’s done step by step so that you can devote the time necessary to the lengthy process and avoid any pitfalls down the line. Start by coming up with a budget and make sure to account for future renovations.
Next up, learn about the mortgage industry, as you’re going to have to choose a lender that matches your needs. In addition to comparing rates from a variety of sources, you’ll need to examine the details, such as costs beyond principal and interest payments. A qualified agent can help you with that in addition to finding your diamond in the rough.
If you have a high credit score and a debt-to-income ratio of under 50 percent, you may be eligible for a conventional loan. Many home buyers prefer conventional loans because they offer low rates and a variety of down payment options. Before choosing a mortgage, shop around for a loan that suits your needs. For example, you can review PennyMac current rates to get an idea how much interest you’ll need to pay on a home purchase.
Hire an Inspector
Let’s say you’ve found that diamond. Are you sure it’s not a money pit? The big risk is that repairs are going to end up eating your savings. You can minimize that by having a thorough inspection, which may also allow you to negotiate a lower price.
An inspector’s services generally cost between $300 and $500, and considering that the average listing price for a home in The Woodlands is $350,000, it’s money well spent. They’ll closely examine the entire house, taking into account the state of everything from the foundation to the heating and cooling systems, which will help you budget for repairs.
Pick a Good Neighborhood
Don’t compromise on location. This is more important than when buying a regular home, as you’re putting so much into renovations and you need a decent resale value to justify your efforts. Check your own area first, as you’re likely an expert there already.
There are a number of things you want to consider, such as the local schools. That may not seem that important if you’re not planning on having kids, but future buyers may take it more seriously. Other important factors include the distance from the city and the proximity of amenities like shopping centers and restaurants.
Be Sure of the Design
Take it from an expert who told Forbes, “You can overlook a lot of things when buying a fixer-upper, such as countertops, finishes, appliances, and flooring. But, if the floor plan is wonky and the layout is wrong, it’s going to be a very expensive endeavor.” In fact, there’s a good chance it won’t even fit into your budget. So, what’s important when looking at homes?
Make sure the overall plan matches your tastes as far as whether you want a more open space or more rooms, as the former means knocking down walls. Also bear in mind that attractive features such as floor-to-ceiling windows and skylights could add too much in higher heating and cooling costs or detract from the resale value.
Plan Your Renovations
Decide what you can do yourself and when you need to hire a professional. Wiring, roofing and plumbing are likely beyond your level of expertise. These jobs need to be done first, so don’t waste time in getting references from your neighbors. There are plenty of places where you can get your hands dirty. Cabinets, counters, flooring and painting are doable if you’re good with your hands, but make sure you’ve got the right tools, including drills, sanders and a jigsaw.
There’s one more thing to decide after the renovations are finished: Do you stay or do you flip? That depends largely on how comfortable you feel in your new home as well as the resale value. Even if you can make a big profit, there may be more money in holding onto it, so do your homework.
Image via Pixabay.