Just like a house is not a home, a fixer-upper also needs love, resources, attention and craftiness to become a true home. Whether you’ve watched home improvement shows, read magazines highlighting the potential of such projects or just heard about somebody who managed to do it, you already know a little bit about house flipping and conversion projects.
However, before getting your toolbox ready, let’s find out what a fixer-upper is, whether it is something that could suit your skillset and how you can make the most of it.
What is a fixer-upper and why are they popular?
The term generally denotes property that requires repairing – reconstruction, redesign, redecoration, refurbishment. The extent of repairing needed is variable and could range from the big stuff (foundation, plumbing) to minor things (windows, carpets). Their appeal comes from their price – they are often sold for prices that are under the market rate. The fact that the buyer must put in time, money and effort to make the place livable justifies the lower price. It’s also worth mentioning that, depending on their wear and tear, fixer-uppers can be lived in as is, provided you can overlook a few unpleasant details.
Who should buy fixer-uppers?
As previously mentioned, fixer-uppers are the starting point of house flipping projects, which involve rehabbing and then selling the property for a profit. Such ambitious entrepreneurs are usually qualified, skilled individuals who are willing to expend lots of elbow grease and who have both the expertise and the necessary financial resources.
At the same time, fixer-uppers could also represent the perfect option for a cash-strapped first-time buyer with a rather inflexible budget. Fixer-uppers are generally regarded as the affordable version of a starter home. The good news? With a couple of DIY fixes, you can often turn a house into a home in a relatively short time span.
How can I find fixer-uppers?
Fixer-uppers don’t have to be like lottery tickets – that is, if you know how to go about looking for them and finding those that have potential. These are the most common and successful ways of finding your perfect fixer-upper:
- Listing services – Real estate-owned and short sale properties are usually in need of repairs, so this is a good place to start, especially considering the number and diversity of online listing services. Make the most of multiple listing services to look for underpriced homes that need some work.
- Auctions – Real estate auctions provide opportunities for discount purchases. If you have the stomach to survive the bidding wars, you can get foreclosed houses for significantly lower prices. However, the drawback is that you won’t be able to see the property beforehand, so you might be in for a bit of a surprise.
- Real estate agents and websites – Hiring a real estate agent specialized in fixer-uppers might be a good idea in order to limit your initial search efforts. Alternatively, you can make use of all sorts of online resources, such as real estate investing websites, along with bank and lender websites.
- Go for a drive – Hopping in your car and looking around a neighborhood could also help you spot fixer-uppers. A neglected exterior generally denotes a neglected interior. Write down the address and start tracking down the property owner.
What you need to know before buying a fixer-upper
Once you’ve found an attractive property and decided that your expertise and skillset could provide you with a significant return on investment, there are still a few things to consider before plugging in your power tools. Necessary steps include:
- Getting a house inspection – It will set you back a couple hundred dollars but do not skip this stage as it will help you avoid surprises along the way. A professional home inspector will offer a full report of what you need to do after conducting a thorough investigation. This is when you can actually find out whether the house is worth the investment or not.
- Finding out whether you will need permits – Some renovations will require permits, and these include for modifying the structure of the living space, electrical work and plumbing, outside structures, etc. Get informed and start out by visiting your municipal government’s website.
- Estimating costs, willingness and ability – Turning your new space into a livable home should be affordable for you. Calculate your renovation costs in detail, writing down not just the big tasks and to-dos, but also prices for materials and labor costs. Although contractors can be pricey, it’s important to be honest and realistic with regard to how much work you’re willing and capable of putting in.
- Paying up and getting to work – Whether you will be looking into loan options or financing the renovation yourself, you must have a good overview of your budget and envisaged cash flow. Finally, make an offer that illustrates the real value of the property and the work that still needs to be put in. Negotiate and try to get a bargain. A fixer upper should ultimately be the opposite of an impulse buy.
What to avoid and how to get your desired profit
First of all, not considering unplanned costs is one of the most common mistakes people can make here. You should always have an expected margin of error and permanently monitor your finances. If you’re preparing for your first fixer-upper renovation project, it may be a good idea to steer clear of properties with plumbing, electrical and other structural issues. Also remember to look out for rot, mold damage and bad siding.
Bringing added value to a property is precisely the process of making a house into a home. There are also certain elements that generally boost the value of a property, such as adding an extra bathroom. Moreover, it’s essential to distinguish between changes that enhance the look of a place and those that augment its actual value. Considering the location of your property is also imperative. Remodeling investments shouldn’t drive up the value of the house to more than 15% above the median sale price of the area, according to the National Association of Home Builders. In other words, while your profit will indeed depend on the final price of the property, you should take into account the value of houses in the neighborhood and not make unnecessary, extra improvements.
Why do you need self storage?
Self storage can come in handy at various stages of this process of buying a fixer-upper. Whether you’ve just purchased a property and you’re getting your tools and equipment ready or whether you have bigger items to store, such as furniture, electronics or other household items, relying on self storage can take a load off your mind. Renovations become easier when the room you’re working on is empty, not to mention the house inspection stage of the process which needs to be conducted on a completely empty house, so that it is thorough. StorageCafe will enable you to find the best option for your specific storage needs.