Are you looking to make money flipping a fixer upper of a house, or save money and turn it into your home? Before you make the big decision to buy that fixer upper, find out as much as you can about your potential project.
A fixer upper can be anything from a house that needs updating such as new paint and carpet, all the way up to a house requiring a complete gut job of walls, floors, ceilings, and even the possibility of roof and/or foundation repairs.
The four questions below are a good place to start before you decide to jump into the fixer upper market.
This question is a good starting point. After all if you are looking at a home that will cost you over $150,000 to purchase and renovate and homes in the neighborhood are selling for $130,000 or less, you will not be making a wise investment.
Another issue about neighborhoods is the potential laws or rules in the particular neighborhood you are buying in. Is the house in a historic district that has requirements that you cannot or are not willing to abide by? Does the neighborhood prohibit fences when you are planning on making a nice private retreat in the backyard with a privacy fence?
Knowing the neighborhood before you make a purchase is a must for smart buys.
It is easy to get excited about the ‘potential’ of your fixer upper. However, the word ‘potential’ can easily get you into trouble if you only focus on the potential and not the reality of the shape of the house.
What shape are the major expense items in? For example is the roof in good shape? How about the foundation? Is the heating and cooling unit working properly and up to code? How about the electrical?
Any of these items can blow your budget out of the water if you are surprised with any of these issues after you buy the house. Paying for a good inspector is well worth the money it will cost you. This can potentially save you from a disaster of a fixer upper.
While it is often impossible at the beginning stages to narrow down your investment to the dollar, with a good contractor, lots of legwork, and a realistic outlook you can come up with an accurate budget.
Always make sure to build in a small amount of “rainy day” funds into your budget. You will hope to not have to use this extra money, but it is better for you to have it there if you need it. If your expected total investment is too much for you to have any “rainy day” funds, you might want to reconsider the purchase of the fixer upper. Most jobs come with unexpected expenses and it is important to be prepared.
If your answer to this question is no, then you need to go no further. It doesn’t make you a bad person to say no and it is better to say “no” than to get in over your head on something you do not want in the first place.
On the other hand, if you answered “yes” to this question you have the opportunity to earn equity in your investment as well as achieving the satisfaction of seeing a house brought back to life (and the trickle effect of improving the neighborhood) for yourself or another buyer that you will sell to.