There are 2 types of FHA 203(k) loans - Rehab/Full/Standard and the Streamline.
The Rehab has a min repair/improvement of $5,000 but no maximum (up to the max FHA mortgage limit for the area) and the Streamline has no min repair/improvement amount but a maximum of $35K. The Rehab allows for structural modifications and requires the use of a HUD Consultant but the Streamline does not allow for any structural modifications and does not require the use of a HUD Consultant. For more information you may call me or visit our site.
Contractor Directory for the FHA 203(k) Program
CFS Mortgage - http://www.cfs203k.com
However, there is an upside to rehabbing and remodelng. The results can be tremendously rewarding and will reflect your individual tastes. In addition, with the right improvements at the right price, you can gain equity in your home as soon as the projects are completed. You and your family are the only ones who can decide what is most important. Look for a Realtor who will guide you through this process: preferably one with experience is working with remodels. You may want to go to my website http://,www.rbhometeam.com, to check out some excellent remodeling project results.
As Gregorio Denny mentioned, you should consider using an FHA 203(k) loan if you buy a fixer-upper.
Contractor Directory for the FHA 203(k) Program
Make sure you get a very thorough and comprehensive idea of exactly what will need repair. many times you can spend more to resurrect the landscaping and redoing the (interior and exterior)paint and flooring than you would on actual repairs. One factor is: do your really want to deal with getting it all done and waiting to move in. It can be a bit of cramp in your lifestyle and qualify of life for the time and money you spend to get the repairs done and style the house to your taste.
I personally like getting a house and fixing it up just so everything is new and done my way. If you find a great remodeling contractor that will do an outstanding job helping you create a great home for you out of a fixer and you don't have to live there during the process, that gets my vote. If, in your heart, you just don't want to deal with all of that and just want to live in the house for a while before you do anything, then "turn key" or "move in ready" is for you! Just get a great inspection to be sure you have an idea of how "turn key" it is!
Some good advice thus far, here is what we recommend:
1. Take a contractor (or two) to the house and ask what it would cost to fix up? If you plan on using a contractor, add 10% to what they tell you just to be safe.
2. if you spend the $60K to $80K more, how much will that actually cost you?
3. Do the math between the cost of the repairs and the cost of the $80K in extra down payment and loan payments. $80K at 5% for 30 years will cost $429 per month.
We hope this helps you.
Mark and Kari Shea
Real Estate Experts Serving San Diego County
Specialists in Investment Properties, Foreclosures, Short Sales,
Development Opportunities & Traditional Real Estate
And speak to a qualified FHA mortgage lender about your financing options
Tripoint Mortgage Group, Inc.
Have a Realtor pull some comparables of properties that are similar but completely rehabbed in order to get what's called an 'after-repair-value'. Then have a contractor walk with you through the property that you are purchasing to get an estimate of repairs. Count on $30 to $50 per sqr foot. Make sure that the equity you create after rehabbing is enough so that you get a return on your cash invested.
Email me if you'd like some help with this or if you have any other questions
You'll want to ask your agent to prepare some comps for the fixer, but for homes in the same condition your house will be in after renovating. This will give you a good idea if the money you're planning to put in for fix-ups will be worth the value after you're done. If you spend more for a house that's already fixed up, your comps to determine an offer price will reflect it's current condition.
If you have time, have a contractor give you an estimate of the work that needs to be done.
Let me know if you have any questions.
This can be looked at in many ways, but here's what I would do. Take the purchase price of the fixer upper along with the cost to get it into the condition you'd like (or at least comparable to the move in ready property) and that should allow you to make a better comparison. However, there may be more problems than meets the eye with the fixer upper, plus you'll have to factor in the time and stress involved in fixing it up. Of course, if you or someone you know can do the work at a relatively good price, that can be a big difference maker. Often times, things end up costing more than you may originally think, so be sure to get multiple bids on the projects you'd have to undertake. No matter which property you select, remember that it is still a buyer's market and there is room to negotiate (not just on the purchase price of the home, but on the work done by contractors who are looking for work.) Hope this helps! Of course, if you need representation on the purchase of the property, I'd be more than happy to assist you.
Also, how much would you actually spend to make the fix up the way you want vs. moving into a property that is move in ready. Personally, I have never been in a house that I didn't want to change something. Of course, if everything works, its much easier to live in a move in ready than something you have to fix up.
And, how handy are you? Are you going to have to hire someone to fix the property up or can you do a lot of the fix up yourself?
One last thing - Let's say you see a house for $300,000 but it needs the kitchen to be updated, bathrooms are ugly, needs carpet and paint, and possibly has some plumbing or electrical issues. You have contractors come in and its going to cost $80,000 to make everything the way you want it. The end result, you'll have spent $80,000 but the house will suit your needs and your taste.
OK, now you look at a house that is move in ready. The carpet is new or just recently cleaned and in good condition. The kitchen is great. The bathrooms work fine. It may nor may not be the colors you like, or you wish it had granite countertops instead of tile, but its very functional and you don't have to do this stuff right away. But the price is $375,000.
Only you can decide whether to take the house that's move in ready (even though you may change some things eventually) or take the fixer that may need $80,000 worth of work (but if you can do some of the labor yourself and you only have to buy materials - it may only cost you $40,000). You may have to take classes to learn how to do some of these things, so you have to decide if its worth your time.
It's truly all about what's important to you.
A couple of questions I work through with my clients:
1.) What are "fixer upper" parts. Are they structural (termites, foundation, plumbing, elect) or cosmetic (popcorn ceiling, outdated bathrooms/kitchens). Try to ball park what work is needed and then look at value added in a re-sale. For example, having a good foundation doesn't really add to the value. When buyers buy a home they expect a solid foundation. But upgrading electric or to copper plumbing can add value. Cosmetic improvements can bring value but are more likely to vary in how much value depending on the market and how "neutral" style that was upgraded. For example, granite may be cool today but will it be in 10 years or will it look as dated as formica does to us now?
2.) Is this house the only "fixer" on the street or is your fixed up value dependent on the neighbors getting to work as well. There is much more risk to pouring money into a home if the rest of the neighborhood is not doing the same thing. The return on investment may be less if is a mixed/transitional neighborhood.
3.) Remodeling can be way stressful to some folks and fun to others. How much do you like giving your own personal touch in design and update choices? If your a project person, great. Realize remodeling (especially of kitchen and baths) can really wear on the occupants. It is a time commitment whether you are doing it yourself or supervising the work of others.
4.) How long you plan on staying in the home can also weigh heavy on the fix/not fix decision. Make sure if you go the fix it up route that you plan to be there long enough to actually enjoy it.
A great web site that might help
I hope this helps.
This is an interesting question and one that may need the old Ben Franklin approach. A list of Pro's and Con's done by the family.
You may want to consider:
Your disposable income
Your interests - Are you a guy that likes to work on this on the weekend or head down to the bay and relax
What type of features the home(s) in your price range are offering..
Are you buying strictly for investment
There is so much to consider in this question
Financially, depending on what type of loan you are obtaining, the additional 60 - 80k a month will cost you about 120 - 140 more a month. If this is a tempory home, the next 5 or so years, it may work out on paper that you spend the extra money now so you can relax later.
Then again, if you want to be out in the garage fiddling on the weekend upgrading the counters, installing new flooring the fixer in this market may be your best option.
Give me a call if you are not represented, and I would love to discuss this further. 619-787-4066.
Have a great day!
A few things to consider:
1) How you will be financing the "fixing up" of the home ie do you have ample cash reserves to pay for improvements? If not, make sure any funds you are borrowing are secured in advance of your fixer purchase. The last thing you want is the fixer without the money to fix it.
2) Are you planning on living in the home while it's being remodeled/renovated or will you have to cover the cost of two places? Make sure you're well aware of everything that needs to be done, best to avoid any surprises. Do your homework! Consult with a GC, home inspector, engineer if need be, etc. and have them look over the property.
3) Get a second opinion and a few estimates from possible subcontractors.
4) Who will be doing the work, DIY or subcontractors? Important distinction to make with regard to budget and timeline.
5) Be clear about what your estimated costs are as they will often be above what you thought prior once you are in the thick of your renovating. That also includes any work that you plan for DIY-ing as if you're not well versed on some of the work, more often than not, the project takes on a life of its own and you may wind up paying someone to alleviate your headaches! (Think the show "Holmes on Homes").
6) Finally fixers can certainly bring you more bang for buck so if you're up for a project and a challenge, go for it! But only after careful consideration of your plan and all the details.
Jill Wheeler, Realtor
Willis Allen Real Estate
You will want to obtain market data to see what the trends are in the zip codes that you are considering. I would be happy to provide you with this type of information. If you are only considering Bay Park, then you should simply find the home that is in the best location that you believe you can acheive the maximum return over time.
If you would like to talk more or receive any information related to your question, feel free to contact me!
All the best,