Dreaming of buying your first home but your budget doesn’t quite match what you’re dream had in mind? Many first time home buyers find their million-dollar vision is a little bit more than their wallet can manage, and that’s where some good, hard sweat equity can help. If you’re up for some organizational details, hard work, and some date nights spent at the local hardware store, a fixer-upper might be right for you.
Here are seven tips you’ll need to turn that fixer into a dream home.
Find the Right Property
A fixer-upper that requires a fresh coat of paint, new flooring, an updated kitchen and bathroom, and some cosmetic changes is a perfect choice. If you’re talking structural changes, plumbing or electrical overhauls, or other labor-intensive (aka contractor-intensive) projects it may not be the right home for you. Use the expertise of a realtor to help you determine which houses are good fixer-upper potential and not money pits.
Have the Right Skills
You’ll need to be a real-time management and organizational expert to tackle a fixer. Hammer, drill, and saw, not necessarily required. Okelo Williams, a real estate broker and owner of DC Home Buzz, told the Washington Post, “The people who are best at fixer-uppers are not necessarily skilled at DIY projects, but they are resourceful and organized.”
Understand What to Pay
Here’s another good reason to have an experienced realtor. Before purchasing any fixer-upper, ensure you’re making an offer that affords you room to renovate and still be competitively priced. Let’s look at an example.
You fall in love with a home in Manhattan, New York, and it needs some work. You’ll need to first understand that the average listing price for a fixer-upper home there is $1.6 million. This will give you a good starting point.
- Have your realtor run comps in the specific area you’re looking at.
- Use the expertise of a good contractor and a home inspector to help you create a cost calculator. This will record all of the renovations and costs that need to be made to the property to bring it up to your desired standards.
- Add 10 to 15 percent for unexpected additions and surprises.
- Subtract this total from the comparable pricing.
- Make your offer.
Know What to Look For
Put your love for the property aside and view it with a critical eye. Here are seven things you should definitely consider.
- Hire an inspector.
- Check appliances and faucets.
- Look under cabinetry.
- See if baseboard and paint align.
- Ask to see the attic
- Check out the water heater
- What permits are needed?
Decide What You Will Tackle
YouTube is a great place to find videos on virtually every home DIY project out there, but knowing which ones you’ll be able to manage and which ones are best left to the experts is critical. Here are some great projects you can work on after you build up a good toolbox complete with drills, sanders, jigsaws, and more.
- Replace flooring
- Add molding
- Freshen up the curb appeal
- Upgrade faucets
- Install some trendy light fixtures
- Get new appliances
Secure the Right Financing
Lenders aren’t keen on lending $400,000 for a home that’s worth $300,000, so you need to be thinking of other financing options. Consider a Federal Housing Administration’s 203(k) mortgage or a Fannie Mae HomeStyle Renovation mortgage. Both of these loans offer buyers money to purchase the home and money to make the necessary requirements.
Do Not Over-Renovate
If you buy a $300,000 house, for example, and you do $150,000 of renovations, and that house is sitting in a neighborhood where the median price is $350,000, you’ve made one of the most common mistakes in tackling a fixer. Be sure your price with your renovations stays close to the median house price in the neighborhood.
Taking on a fixer-upper can be very rewarding. It can also be unmitigated disaster. Use these tips and commit to some hard work, and you’ll be kicking back to enjoy your new dream home.