Buying a “fixer-upper” is a common dream across different generations, thanks in part to the popularity of shows on HGTV that glamorize home renovations. Buying an old home below market price and making it your own is really appealing. However, a home transformation is a major investment of time and money, and it may not be the best choice for everyone. If you are considering a rehab property for your next home, review our top three considerations for determining whether a fixer-upper is right for you.
One of the most challenging aspects of buying a fixer-upper is creating the right budget. While fixer-uppers tend to be listed on average eight percent below market value, the purchase price of the home is only the beginning. Renovations can end up costing more than expected, particularly in old homes. There are a number of issues that can be discovered once the renovations begin. For example, if you decide to remove interior walls it can reveal issues like mold or shoddy electrical wiring that you were not anticipating. Renovations typically go over budget therefore additional funds should be set aside for the unexpected.
Another budgeting challenge is cash flow. Home renovations cannot be paid for with a conventional mortgage. If you’re looking to do major renovations, you’ll either need to have cash saved to pay for materials and labor or you will need to pursue a different kind of loan. Many buyers who don’t have the cash on hand for a renovation rely on 203K loans, which are insured by the Federal Housing Administration to help pay for the rehab. However, these loans have a few caveats, including limits on how much you can borrow. It is always a good idea to get price estimates ahead of time from professionals for your planned renovation.
The second factor to consider before buying a fixer-upper is what the renovation timeline will really look like. If you need to move into your next home as soon as possible, a fixer-upper may not be an option for you. Depending on the state of the home when you buy it and how much you plan on rehabbing, your home could be unlivable for weeks or potentially even months. A good rule with fixer-uppers is to always budget more time than you think you’ll need. Fixer-uppers can be unpredictable so you should always plan ahead for complications.
Buyers need to consider whether they can afford to pay for two homes at the same time while the renovations occur or possibly have an alternative such as staying with family. If your plan was to live in the home during the renovation, you should be sure to buy a fixer-upper that only needs minor, cosmetic upgrades and doesn’t disrupt your daily life.
Your construction knowledge and abilities are important to note when considering whether a fixer-upper is right for you. Would you consider yourself an amateur handyman or does your construction experience come from watching HGTV? If you can handle some minor repairs and painting, you can save yourself quite a bit on money in the long run. If you have limited construction knowledge, it will be important to get an expert involved as soon as possible. Many Senné Associates have direct experience working with construction and development. Having an agent who is knowledgable will be helpful during the home search process to determine whether the renovations you’re considering are realistic for that particular property. Senné has numerous trusted partners in the industry who you can rely on to inspect and design the fixer-upper of your dreams.
If you’ve considered the above factors and determined a fixer-upper is the right investment for you, give us a call at 617.314.9400 or contact us to get matched with a Senné Associate and start your search today.
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