There are two ways to buy a fixer upper house: roll the dice or be very particular about every detail. To make the smartest home buying decision you can, these are the most important things to closely examine on every fixer upper you consider.
Pick the worst home in a good neighborhood.
If you fix up a house in a neighborhood full of fixer upper houses, you’re not going to get a great return on your investment, because housing prices are set in part based on others around it. Instead, find a nice neighborhood with one eyesore and renovate that. Your real estate agent can be a big help in determining the value of a home’s location.
Get specialized inspections.
Fixer upper houses come with specialty issues, so they need specialty inspectors. People who do general home inspections won’t check some of the major systems that can cause problems in a home that needs a lot of help. Here are some of the specialized expertise to consider:
- Structural Engineering: A crack in a basement wall can mean anything from harmless house settling to structural problems that could cost tens of thousands of dollars to fix.
- Sewer Line or Septic Inspection: Sewage systems age along with the home. Make sure yours isn’t teetering on the edge.
- Pest Inspection: Ants, termites, bees, and beetles can all wreak havoc on a house. If an inspection turns up an infestation, you can ask the seller to pay for the fix.
- Roof Certification: A roof certification will determine the life left in the roof and guarantee the roof for up to five years.
Evaluate needed repairs.
Peeling paint and ugly carpet are easy fixes. But moving load-bearing walls and removing hazardous materials like asbestos? Those jobs add up. If you’re buying a fixer upper, do an inventory of the work you would do in the first few years. Then figure out how many you’ll need to hire a pro to do and which are DIY home projects. If more projects fall into the “major job” category, it might be more trouble than it’s worth.
Factor repairs into your offer.
If you’ve found a house with manageable repairs that you’d like to buy, it’s time to do a little math. Use your list of needed repairs to price out each project and come up with your total renovation costs.
Take the renovation costs into consideration when making your offer in four ways:
- Make sure your offer plus the needed renovations won’t be greater than the amount you could expect the upgraded home to appreciate (go up in value). Your real estate agent can help you with that figure.
- Next, make sure your monthly mortgage payment will be low enough that you can afford to pay for ongoing projects.
- Decide how much work (if any) must be done to the house before you live there. If there’s more to do than you can afford up front, research types of mortgages that allow you to finance necessary repairs along with the home’s asking price—and don’t forget to add up your alternate housing costs while the work is going on.
- Create a schedule that will help you visualize your budget for the first few years.
If the math checks out, you’re in a good position to make an offer. An ideal fixer upper is hard to find, so it’s time to celebrate—and to get on a first-name basis with the folks at your local hardware store.
Ready to find a great deal on a home by buying a fixer upper? Sometimes homes in need of work are in foreclosure. Read about how to buy a foreclosed home here.