If you have been on the hunt for a new house, chances are you have encountered some listings that describe a property as “in need of a little TLC,” having “huge potential,” or being a “renovator’s delight.” These descriptions fit a fix-upper home perfectly.
A fixer-upper home is one that requires major renovations or repairs. This type of property is great, but you need to consider other factors. One mistake can cause major problems.
This guide will help decide if a fixer is right for your needs.
What are the advantages of buying a fixer upper?
For many reasons, a fixer-upper may appeal to homebuyers. These are just some:
1. Lower purchase price
To make it easier to move up the property ladder, most fixer-uppers will be sold below market value. There might be some negotiation, depending on the outcome of the building and pest inspection. If you have enough cash, you might not need a loan.
2. Sweat equity
Any improvements or renovation work you take on should increase your home’s equity. The renovations and repairs that you make to your property will increase its value. Building equity is a great way to increase your property’s value, whether you are looking to sell or refinance your mortgage.
If you intend to sell a fixer-upper, it is important to not overcapitalize. It is possible that your property is worth more than what buyers will pay.
3. Possibility to personalize
Fixer-upper homes allow you to put your stamp on the property. This can be very lucrative. This is a good option if you’re looking to purchase a home to live in. When buying a fixerupper for investment, it’s important to be conservative. Potential buyers might not like the same thing that appeals to you.
What are the drawbacks to buying a fixer-upper?
There are some potential advantages to purchasing a fixer upper, but there are also disadvantages.
1. Renovation takes time
It will take a lot of commitment to fixer upper. You will need to put in a lot of effort and time, even if your contractor is hired. It is your responsibility to be available to answer any questions tradies may have or to provide instructions on how to accomplish certain tasks. If you don’t hire a manager to help you select fixtures and coordinate delivery. It may take more effort if you do it yourself. You need to be realistic about the time you have to complete it and to be able to anticipate any problems.
2. Unexpected repairs
While a dated kitchen or bathroom is easy to spot and replace, structural issues are not – and they can easily eat up your budget. Before you buy a fixer-upper, you should have a building and pest inspection. These inspections will tell you if the property is worth your time, effort, and money. Here are some indicators that a house might have serious structural damage.
- Cracks in foundation walls, masonry walls
- If paint becomes discolored, peeling or bubbly, it could be an indication of water damage.
- Framing roofs or floors of too small dimensions
- Sagging can be caused by too low rooflines, exterior walls and floors.
- Termite damage
- Moldy signs
3. Buyer’s remorse
Renovating a fixer upper can be stressful, especially when there are rising costs and other issues. The stress of a large project is not something that homebuyers are built for.
What factors should you consider before buying a fixer-upper property?
In order to find the perfect fixer it is essential to plan ahead. These are the most important factors to think about:
1. Renovation cost
You want to purchase a property that is more value than you paid for. While you might be able to buy the home at a lower cost, it is important that you factor in the costs associated with renovations and repairs. For unexpected repairs, leave a buffer of 10%-20%.
Look at the amenities nearby. Is there an elementary school? Is there any retail shops, or other amenities in the area? Is it on a busy main road? If it’s located in an attractive area, the fixer-upper might be worth the investment.
3. Good bones
In real estate parlance, “good bones” is used to describe a fixer-upper with structural, electrical, plumbing, and mechanical systems in good condition. You can find out if the property’s structural integrity by getting a building inspection report.
4. Local and regional regulations
It is also worth checking with local councils what permits renovations. Some councils, for example, do not allow home extensions to be built or the façade to be changed. You might have restrictions about how many trees you can take from your property. These restrictions could be applied to your plans if they are not in accordance with council regulations.
It is essential to evaluate the scope of any renovations you intend to do and the amount of effort and time required. This will enable you to set a realistic timeline for when the property can be moved into or sold.