Can You Handle a Fixer-Upper?
Buying a home that needs a little (or a lot) of work can be a great way to build equity and wealth, but it’s not for everyone. Here are some questions to ask yourself to see if it’s right for you.
Have you ever done a renovation or built a home before?
What work are you willing/able to take on?
What work will you have to hire a contractor for?
Where will you live during the renovation?
Where will you go if the work takes longer than expected?
How will you fund the renovation?
What will you do if the work goes over budget?
Does renovating a home meet your financial goals?
Not all fixer-uppers require equal fixing - and what needs to be fixed is somewhat subjective. A major rehab for one home buyer is a walk in the park for another. Consider your expertise, your finances, and to what extent you want to tackle a home that requires a lot of work.
You don’t want to buy just any fixer-upper. You want to buy one that makes sense. While everyone’s priorities will be slightly different, resale value is often a great place to start. Whether you plan on flipping the home or living in it for a while, it’s worth hedging your bets to have your investment pay off once you’re ready to sell.
Here are a few indicators to keep in mind:
Location: Location is always king. After all, you can change a lot about a home, but you usually can’t move it. Look for homes in popular areas or good school districts. If possible, choose ones that offer privacy from busy roads and commercial structures.
Functional layout: Yes, you can move walls, but it gets expensive quickly. The better bet is to focus on finding a layout that allows you to keep things more or less the same.
Structurally sound: Sloping floors, cracks in the walls and water spots are major red flags that the home will need extensive - and expensive - structural repairs. Unless you have experience with this type of work, it may be best to look elsewhere.