Is Buying A Fixer-Upper Worth It?
Home buyers often start their search looking to score a deal on a fixer-upper, hoping to transform it into their dream home. Though it sounds like fun, the reality is that the overhaul process—full of decision-making, unexpected headaches, and constant budget changes—can be very overwhelming.
To really make a renovation work, it’s essential to plan ahead, secure a good team of contractors, and set a realistic budget and timeline. Here’s what you need to know before buying a fixer-upper.
Before you even look for an apartment or home, you want to understand what type of project you’re comfortable with. It’s one thing to buy a cosmetic fixer-upper, like pulling up carpet or laying down tile, but it’s something else entirely to buy a home that has serious structural damage. The size of the project you’re willing to take on will set the tone for your house hunting (it will also impact what kind of mortgage you can get). If you can’t commit the money, time, effort, and risk that goes into buying a place that needs a gut renovation, skip the open house altogether, even if the price tag looks appealing.
How you’ll pay for your renovation will impact your house-hunting process. If a house is in good condition and just needs cosmetic changes, you can likely qualify for a conventional loan. In this case, you’ll need to plan what portion of your savings goes towards the down payment and closing costs and how much you can budget towards renovations. However, if there are larger structural issues or major repairs (say the house needs a new roof or the kitchen has no working appliances), you’ll need a renovation loan.
There are several types of renovation loans that you should discuss with your real estate agent and your bank to ensure it’s the right type of financing for you. Later on, once your renovation is complete, there are some financial strategies you may consider. If you believe you have significantly increased the value of your property, you can go back to your lender and request a new appraisal. Some homeowners even choose to refinance after a major renovation.
Secure a Budget
If you’re interested in tackling a fixer-upper, be realistic about how much money you must set aside for renovations after the down payment. Include costs like rent for an alternative living situation while it’s happening, at least a 10-percent cushion for going over budget (and you will go over budget) and even things like the electric bill – your contractors will need electricity while they are working and that can start to add up to hundreds, and even thousands of dollars.
Depending on your level of knowledge in construction and the type of fixer upper you are investing in, you will probably want to consider hiring a team of professionals to help you. Your realtor will be able to recommend great local contractors, and you can also look online using sites like Houzz or AngiesList. Using a reliable company will greatly save you in the long run by avoiding costly mistakes.
Prepare for Mistakes
Along with the physical labor of a fixer-upper, you should prepare yourself for an emotional roller coaster, as well. There will likely be many changes and mistakes along the way that can take a toll when you are ready to be in your new (finished) home. To plan for the smoothest process possible, be honest about your goals and your budget before purchasing with a fixer-upper.
Are you considering buying a fixer-upper? You don’t have to make that decision alone! At Coldwell Banker Carroll Realty, we can help you navigate the complexities of buying a property, no matter what condition it may be in. We have experienced real estate agents throughout Panama City, Panama City Beach, and 30a ready to meet with you! Start your search for the perfect property with us today.