Thinking About Buying a ‘Fixer Upper’? Here’s What You Need to Know.
If you love DIY projects and all of the fixer-upper shows on television, the idea of completely renovating and re-doing an old home can seem like an enticing premise.
Unfortunately, investing in the wrong fixer-upper can mean an AWFUL lot of expenditure without the added financial rewards.
SO, whether you’re considering investing down the road or are ready to dive in, here are a few things to consider first.
Want to learn about other great real estate investment strategies? Learn about home short sales, real estate crowdfunding, and more in our blog for beginner investors!
How Much Do You Want to Spend on Your Fixer-Upper Investment?
It’s easy to be swept away by the possibilities of a good home renovation project…
But before making an offer on any investment property, you’ll need to sit down and determine exactly what you’re willing to invest into upgrades for your fixer-upper.
Start by deciding:
- what you would want to renovate
- what the cost of materials and labor would be
- how this figures into the market price of the home
Then, you’ll be able to determine if the price you’re offering will be worth it.
A good rule of thumb is to take the market rate for that property, subtract 20% (this will be your profit), and then subtract any renovation costs from that to arrive at the amount you want to spend.
So for a $100,000 home requiring $25,000 in renovations, you should look to not spend more than $55,000 to buy it.
$100,000 – 20% ($20,000) – $25,000 = $55,000
If you’re wondering how to find sellers willing to part with their property for such a low price, read our articles on:
How to present a lower offer without losing your real estate deal
How to find motivated sellers in real estate
Are Major Repairs Required on the Fixer-Upper?
As we just saw, renovations are a major factor in your decision of whether to buy a fixer-upper investment.
It’s one thing to consider a nice paint job and new tiling in the kitchen, but if there are serious issues with the home, it can create huge financial issues for you in the future. Foundational issues or water damage throughout the home can be expensive items to repair and will take time and resources.
Fixing these issues may cost more than the money you’ll make.
If you’re uncertain about what you’re getting into, it may be a wise decision to bypass the investment altogether.
If you’re a first time buyer or beginner investor, learn what to look out for in your property viewing to avoid costly mistakes and bad investments.
Are You Willing to Work Hard to Make the Home Renovation a Success?
If you love DIY projects, want to try your hand at renovating a home, and are willing to do a lot of work to make your dream happen, then Fixer-Uppers can be an amazing investment!
However, if you’re thinking of hiring people to do the work for you, this can end up costing a LOT more money and eating any profits the renovations might have created.
So, we suggest fixer-uppers as great invest
It’s also important to realize that renovations can go over budget.
Instead of being idealistic about a fixer-upper, ensure you’re CERTAIN it’s what you really want. That way, you’ll never be stuck with a home you don’t want to invest your efforts into.
And what can you aren’t enough of a DIY’er to invest directly in fixer-uppers? Read our guide to real estate crowdfunding to find out!
So, Here’s What You Need to Know About Buying a Fixer-Upper
The idea of digging in and getting your hands dirty with purchasing a fixer-upper may be endearing. Your own investment – for a fraction of the price!
If you’re not truly prepared for the responsibilities, it can be a drain on your time and your finances.
BUT if you are fully prepared for what’s to come, there is no better source of passive income than a great deal on a real estate investment, like a fixer-upper.
If you’re looking a home in need of help in your neighborhood, browse hand-picked fixer-upper investment across North America, curated by the AQRE Home real estate experts!