Perseverance. That’s the key ingredient to succeed with a fixer-upper. Buying a home that needs repairs can offer excellent investment value if you’re willing to put in the work. You’ll also need to avoid costly errors during the process. The steps are the same regardless of whether you choose to live there for the long haul or flip it for a profit.
Figure Out What You Can Afford
Determining affordability is a complex calculation based on how much you can borrow and under what conditions, and you don’t want to get in too far over your head, particularly when you have renovations to manage.
According to Business Insider, lenders use a “28/36” ratio to determine the mortgage, meaning the loan payments shouldn’t take up more than 28 percent of your pre-tax income with a total debt load of no more than 36 percent. You will also need to determine how much of your income you’re willing to invest in renovations.
Also, when reviewing your loan options, don’t be discouraged if you have less to put down. In fact, you don’t even need to spend a huge chunk of your savings as a down payment. For example, you can apply for FHA loan programs. These loans offer flexible down payment options, and are a perfect choice for first-time home buyers. There are even FHA loans specifically created for fixer-uppers.
Find The Right Property
With a fair idea of what you can afford, it’s time to check out the market. Your real estate agent will be able to guide you on what to look for in a fixer-upper. In addition, they’ll be able to gauge the value of the property. They will also be able to deter you from purchasing a property that has the potential to be a money pit.
You’ll gain certain advantages if you buy a home close to where you live. For one thing, you’re already familiar with the surroundings and local amenities as well as the quality of the school district. Plus, you won’t have to say goodbye to friends and family, not to mention you won’t have to spend exorbitant amounts while moving.
Conduct A Thorough Inspection
Though every fixer-upper will have a little wear and tear, you’ll need a professional to make sure it isn’t too much. They’ll also be able to point out what’s wrong with the home so you can begin planning and budgeting for your renovations.
The report you get could be your secret weapon when you begin negotiating with the owners. Even with a fixer-upper, certain structural problems such as water damage could take a huge chunk out of the price. You could also insist that some repairs be made by the owners before the deal goes through. Either way, you win.
Address Major Renovations
Once the deal is done, you’re probably looking forward to moving into your new home. Not so fast. It’s important to tackle major renovations first before you get settled. These include tasks like foundation repair and remodeling kitchens and bathrooms. You may also want to have flooring and carpeting finished before you move in. Keep in mind that to maintain the integrity of the property, it’s important to work with qualified home improvement specialists. These experts can ensure everything is built to code and specifications, plus they can make these repairs and changes more quickly than a layperson. When looking for local bathroom, kitchen or cement contractors, be mindful of reviews and customer testimonials before choosing a specialist. It’s important to find someone you can trust who will complete the job to specification and in line with your budget.
Get Your Hands Dirty
Once the major renovations are done, you can add your personal touch. Your taste will determine what DIY projects you can tackle, but don’t forget about investment value. Adding a backsplash to your bathroom or changing the fixtures can make your home worth more, as will crown molding in the bedrooms. Remember to get the right supplies and power tools such as drills and sanders before you start, so you aren’t stuck returning to the home improvement store during your projects
Whether to sell or stay can be a difficult decision, of course. Holding onto the house means the potential for amassing wealth in the long run, while flipping gives you a quick source of cash. Look closely at the market value of the house and neighborhood, and whether that’s likely to rise or fall in the future.