You found a house for a great deal. You can’t believe how low the cost of the home is – can it be true? You start imagining all of the things you can do to the home and how much profit you can make on it after you fix it. It sounds amazing.
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Before you jump in headfirst, though, you need to know how to tell the true cost of a fixer-upper home. Sometimes there is more to be seen than you see with your naked eye. Learn how to properly evaluate a fixer-upper home to see if it’s right for you.
How Old is the Home?
First, find out the home’s age. This could play an important role in how much you have to do it. The necessary fixes may be more than cosmetic when the home is too old. When contractors start working, they may find more problems that have to be fixed. This can add to the cost of the home or take away funds from the money you were using for the renovations.
Typically, the older the home is, the more problems you should expect. It’s not a bad idea to have an inspector come through and determine the condition of the home. If there are problems that are beyond your budget or abilities, you may want to back out of the purchase.
Consider the Major Remodeling
Walk through the home and make a list of what you would change on it. Are the appliances outdated? Has the flooring seen better days? Does the kitchen need a complete gutting? You’ll then want to talk to professional renovators about estimated costs. You don’t have to get into the nitty gritty just yet, but having a ballpark figure can help you decide what it will cost.
Again, with any type of major remodeling, you run the chance of seeing much bigger issues with the home. Hopefully hiring an inspector will help some of it, but you may find that you have more issues than you bargained with even after paying an inspector.
It’s always a good idea to keep a contingency fund handy. This way if there are problems with the renovations and there will be more costs, you’ll have the funds ready. This can eliminate the risk of having to deal with picking and choosing between the renovations just to bring the home up to code.
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Find Out How the Renovations Will Affect the Value
Did you know that not all changes affect a home’s value? You may sink a bunch of money into a home and not see much of a return. Then what do you do? Those renovations just become much more expensive to you. Rather than letting that happen to you, consider consulting with a professional real estate agent or appraiser. Let the professionals tell you how your renovations will affect the home’s value.
Will you see enough of a return on your investment? If not, you may want to go back to the drawing board. Are those renovations necessary? Is there something else you can do with the money that will affect the home’s value?
How Much Time Will it Take?
Let’s not forget that time is money. How long will the renovations take? Will you have to put in your own labor? Do you have the time to do so? If it will eat up your time and take you away from other things, this adds to the cost of the fixer-upper home. Even though time doesn’t take money straight from your wallet, it does prevent you from doing other things that you could be doing to make money.
It’s important to ask contractors what their estimated turnaround time is too. If the work will take too long and you’ll be ready to sell the home in the winter, it may not be the best time. You probably won’t see the greatest return on your investment selling at this time of year. If, on the other hand, you can time it so that you are ready to sell the home in the spring, it can be a whole new story for you.
Take your time to figure out the true cost of buying a fixer-upper home. Don’t focus on the fact that you are getting a ‘deal.’ Instead, look at the big picture. What needs to go into the home to make it livable and enticing for people to buy it? These costs must be added into the home’s price for you to figure out your true return on your investment. This will also help you decide if it’s worth it.
