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Finding the perfect house can be a tall order in today’s economy. With all the competition in the housing market, buying a fixer-upper can be a great way to step into homeownership without necessarily spending a ton of money in the process. If you can’t find the move-in ready home you’re looking for, you can still look for a fixer-upper that needs a little bit of work.

Start by asking yourself, should I buy a fixer-upper? If you’re leaning toward yes, let’s explore this in more detail.

What is a Fixer-Upper House?

Some people are in the market for their dream homes, and others are in the market to build their dream homes. It’s the latter who might be interested in buying a fixer-upper. A fixer-upper is a neglected home that requires substantial repairs or renovations to be in working order. It may have been damaged by fire, floods, or several other unfortunate events, or it may just be an old home that needs a facelift. Whatever the case may be, you can often find great deals on fixer-upper homes — if you’re willing to look, of course.

If you’re considering the prospect of buying a fixer-upper, there are a few crucial factors to consider. If you’re buying a fixer-upper for your first home, it could be a great way to gain hands-on experience with working on home projects. On the other hand, this may not be a good idea if you’re not handy or need more time to renovate the place. Either way, there’s a lot to know before you begin.

The Pros and Cons of Buying a House That Needs Work

Of course, it’s not all sunshine and roses when you’re buying a home that needs work. There are pros and cons to consider before taking the plunge. If you don’t know what you’re getting into, you could have a colossal headache on your hands (without much to show for it).

The Pros

• Lower Price: Buying a fixer-upper can often mean getting “more house” for your money; the cost of repairs and renovations is often lower than what it would cost to buy an already completed home.
• Potential Equity: The renovations you conduct could significantly raise the home’s value, putting you in a better financial situation than before. In fact, this is one of the major benefits of buying a fixer-upper — you might turn a profit if you decide to sell the home later on.
• Increased Flexibility: Rather than being stuck with someone else’s design, you can customize and make it your own. This is a great way to express yourself through interior design, creating something that truly reflects your style and personality.
• Learn New Skills: The first time you renovate a house is like the first time you ride a bicycle. You might not be immediately great at it, but with practice, you can become a pro in no time. This is a great way to learn new skills, many of which will serve you well in future projects.

The Cons

• Time Commitment: Buying any house is a big investment, let alone one that you plan to renovate. It takes time and effort, from researching any potential problems to wielding the hammer and nail yourself. This commitment may take months (or even longer) to complete.
• The Sense of Overwhelm: If you’re not feeling at least a little anxious about taking on a fixer-upper, you’re not paying attention. It can be a daunting and stressful process for those who need to become more experienced in home renovation. All the details can easily overwhelm anyone, and that’s okay and expected. Remember, you can always take a deep breath and break up the work into smaller, more manageable chunks.
• Unknown Costs: What’s it going to cost to renovate the house? Whatever figure you have in mind is probably wrong. It’s tough to accurately estimate the costs when dealing with a fixer-upper in which anything can surprise you and throw your budget out of balance. Have a hefty financial buffer in place, both for yourself and the house.
• Possible Structural Problems: You may only know the full extent of a house’s structural problems once you really get into it. The cost of repairs could go through the roof if serious issues arise. So get a professional inspection before signing on that dotted line.

7 Tips for Buying a Fixer Upper

All cautionary tales considered, buying a fixer-upper can be an incredibly rewarding experience if you go into it prepared. Here are seven tips to help make the process more manageable and successful.

1. Get Into the Right Mindset

DIY home renovation is no joking matter. You’re in this for the long haul, not to make a quick profit. So get into the right mindset and be prepared to make the necessary investment of time, energy, and money in order to turn your dream into reality. It’s a major undertaking, so be ready for it.

>> AGENT ANSWERS: If I buy a fixer upper where can i get money to renovate?

Think about the auto mechanic who loves to tinker with engines and create cars that are truly his own. That’s the kind of mindset you’ll need to cultivate yourself to make it through this process. This is about building a house that’s uniquely yours. Even if you do end up selling the house, you’ll be selling the labor of your own hands, something that you can truly be proud of.

2. Allocate for Your Time Investment

There needs to be a way to predict how long this is going to take. Fixer-uppers are notoriously fickle. When taking on a huge project like this, budget out more time than you think you’ll need. You might not finish as quickly as you want, but at least you won’t be surprised.

Things go wrong unexpectedly, especially when you’re dealing with old houses. You might think you only have to fix the plumbing, but then you find out that the bathroom wiring needs replacement. Or the roof is in worse shape than expected. These things happen and frequently, so set aside an ample buffer of time and money to take care of them.

3. Focus on the Location

“Location, location, location.” You’ve heard it all before, but it matters more than ever when dealing with fixer-uppers. Not everyone wants to live in a dilapidated house, so you need to make sure that the area is desirable and has growth potential. Look into the neighborhood schools, assess the level of crime, and research the city’s plans for development in the area.

You’ll need that information and more when it comes time for a home appraisal. Furthermore, research local and state laws, zoning regulations, building codes, and other pertinent information when assessing the location of your fixer-upper. Ask yourself what home renovations require a permit. It can seem like a lot of work, but it’s really going to save you a lot of time down the road if you plan ahead.

4. Check on the Home Inspections Needed

Every fixer-upper is going to need some level of home inspection in order to address all the potential problems it might have. From plumbing to electrical work, you’ll need to bring everything up to code before you (or anyone else) moves in. It’s the only way to make sure that your house is safe and habitable.

If the home is really old, it might also need a historical inspection to verify that it’s up to the standards of its time. Depending on the age and condition of your house, you may even need a structural engineer to inspect the grounds for any potential issues.

5. Overestimate Your Renovation Costs

When you’re first learning how to finance a fixer-upper home, it’s easy to underestimate just how much money you’ll need to get everything in order. Parts are more expensive than you think, and labor can take a lot longer than expected. Plus, there are many hidden costs to consider when taking on this kind of project.

You can quickly get carried away in all the costs associated with renovating; try overestimating your budget by about 10-15% more than you initially thought. The idea is to give you a safe and practical margin of error that lets you cover any surprise charges that may come up. It’s definitely better to be safe than sorry when dealing with a major home renovation, even if you’re not buying a fixer-upper to live in yourself.

Be sure to create a budget before you’re knee-deep in renovations. Before you so much as pick up a tool, take some time to really add up the cost of supplies and labor. Knowing your budget ahead of time will help you prioritize projects and decide what renovations are within your means. It can keep you from going into debt and also be a useful guideline when it comes to selecting materials.

6. Develop a Project Plan

You’ll want a detailed and clear project plan before you start doing anything. The purpose of a project plan is to help you properly manage the costs and timeline for this project. You need to know where you’re going, how much it’s going to cost, and what kinds of problems you might run into before you begin.

You should also include a contingency plan to cover unexpected costs if something goes wrong, including an emergency fund. Your project plan should also include exact estimates of:

• Labor costs.
• Material costs.
• Timeframes and deadlines.
• Potential roadblocks.
• Contractor fees and requirements.
• Any other expenses you can foresee?

7. Learn the Types of Home Loans for Fixer-Uppers

If you’re trying to figure out how to buy a fixer-upper with no money, securing a renovation loan might be the way to go. A renovation loan is a type of fixer-upper home loan that finances both the purchase of a home and its renovation costs. It lets you get into your fixer-upper faster, and pay for improvements over time instead of all at once. In addition, the interest rate is often lower than other types of financing, so it’s a good way to save money.

>> AGENT ANSWERS: How to sell a fixer upper home?

If you pick a renovation loan, you’ll want to know more about the available kinds. FHA 203(k), VA renovation loans, and HomeStyle mortgages are among the more common. Each of these has its own pros and cons, so make sure to read up before making a decision.

• VA Renovation Loan: The Department of Veterans Affairs offers VA loans to help veterans and service members purchase or renovate a new home. You’ll need to get a VA-approved contractor and have your lender review the project carefully.
• HomeStyle Loan: You’ll need a higher credit score for a HomeStyle Loan than you would with other financing options, but it can be used with almost any type of improvement project. You can use a HomeStyle loan to build a new pool, add landscaping, or even install a sauna — luxury renovations are welcome.
• FHA 203(k): These are offered by the Federal Housing Administration in order to help people with lower credit scores and incomes purchase their own homes. It’s easier than securing a traditional mortgage and can also be used to finance home improvement projects.

There’s also the CHOICERenovation loan, a type of mortgage geared toward purchasing a fixer-upper and necessary renovations, particularly to make the house more resistant to natural disasters. You can use it to finance the purchase price and all eligible repairs.

Find Yourself the Ideal Fixer Upper

Buying a house that needs work is its own kind of adventure. Although the steps to buying a fixer-upper home can seem a little daunting, the rewards are well worth it. Buying a fixer-upper gives you a chance to:

• Create a home that fits all your needs and wants.
• Save money by doing the repairs yourself.
• Gain financial equity in your home.
• Finally, create a unique home with your own personal touch.

Of course, you don’t have to do this alone. You can always use FastExpert to find the right real estate agent who can help guide you through the process. By finding qualified real estate agents in your area, you can get the assistance you need in your search for a fixer-upper home.

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• Source: https://www.fastexpert.com/blog/buying-a-fixer-upper-home-guide/