5 Things to Plan For When You Buy a Fixer-Upper
There’s nothing as exciting as the opportunity to purchase and renovate a fixer-upper. You learn practical repair skills, buy a house at an amazing price and have the future potential to turn a substantial profit. However, being ill-prepared for the process can create budgetary quicksand that leaves you up to your elbows in projects and financial obligations. When you decide to begin this journey, it’s important to have a local expert on your team. They can guide you through the process, and help you understand what to look out for.
As you dive in, here are some important considerations and pitfalls that buyers can run into, courtesy of the Engelman Real Estate Team.
Estimate the actual cost
This means more than just knowing the current market value of the home and estimate for repairs. Be honest about your current income, the down payment and overall monthly investments. Add the numbers up and divide to get the average cost that your house will run you per month. Even the most detailed and comprehensive budgets can miss the mark, so plan on spending 20 percent more than your best estimate.
After determining your financial viability, look into the many different kinds of loans that are available for home renovation. According to the Nerd Wallet, there are several types of loans that many people use when buying a fixer-upper.
FHA loans require you to work with a contractor, while homestyle renovation loans allow you more flexibility. If you’re a veteran, you may be eligible for a VA loan, which could get you a lower interest rate than other loans. Look at the current average annual percentage rate (APR) to know how much you will ultimately pay for the loan. Luckily, there are apps that can help you calculate the cost of your mortgage. To get an idea of what you might spend, your agent can be a real asset in helping you survey the local market for average home prices. While you might not spend that much on your loan, having those numbers in front of you makes it easier to prepare a budget.
Prioritize projects
The first time you walk through the house, take an inventory of which projects are going to be the most difficult. Some work might be cosmetic, such as painting or yard management. For projects that will require a high level of investment, put these as top priority. You’ll also want to have the proper power tools such as drills, hammers and jigsaws for DIY projects. Think about what services you’ll need to hire if you’re looking to save time or are unable to accomplish these projects yourself.
And be cautious when it comes to hiring out contractors. A bad contractor is one of the biggest nightmares that many people run into. Consult with your agent, friends, neighbors and online reviews to find a contractor that will give you a fair price, perform high-quality work and get things done in a timely manner.
Living with renovations
Business Insider suggests that living in the fixer-upper while you work on it can help with monthly budgetary costs and give you time to plan renovations. Plus, living in your home during renovations can also be a trial period to help you determine whether to stay or sell once the work is complete. Take note that to ensure you’re able to live comfortably during renovations, it’s important to carve out a space that you can keep clean and where you can relax. Many of your belongings may have to be put in storage during this time, so it’s probably a good idea to assess and price units in your city so you can budget accordingly.
Use your negotiation power
The increased popularity of fixer-uppers has had an impact on availability. Look at inspection information that highlights work that needs to be done so you can get the best price. Your agent will be able to help you understand how to approach this, and carefully discussing repair contingencies can help you get the deal of a lifetime.
Plan for long-term
Each project may take a little longer than you think, but when you add the extra time for every project, it’ll probably take you longer than you anticipate. Working with contractors is often a source of delay, but if you’ve carefully vetted the contractor you work with, you probably won’t have too much to worry about.
Buying a fixer-upper can be a big gamble because of how much effort it will require and assumptions about the housing market. Work with an agent and consider the monthly costs, loan types and current average APR to make an informed decision. Careful and honest planning that accounts for the realities of the local housing market can help give you a financial edge and make the decision to buy a fixer-upper a satisfying and profitable choice.
When you’re reading to buy the fixer upper you’ll transform into your dream home, give the Engelman Real Estate Team a call at 515-446-2888 or stop by the website to contact us.
There’s nothing as exciting as the opportunity to purchase and renovate a fixer-upper. You learn practical repair skills, buy a house at an amazing price and have the future potential to turn a substantial profit. However, being ill-prepared for the process can create budgetary quicksand that leaves you up to your elbows in projects and financial obligations. When you decide to begin this journey, it’s important to have a local expert on your team. They can guide you through the process, and help you understand what to look out for.
As you dive in, here are some important considerations and pitfalls that buyers can run into, courtesy of the Engelman Real Estate Team.
Estimate the actual cost
This means more than just knowing the current market value of the home and estimate for repairs. Be honest about your current income, the down payment and overall monthly investments. Add the numbers up and divide to get the average cost that your house will run you per month. Even the most detailed and comprehensive budgets can miss the mark, so plan on spending 20 percent more than your best estimate.
After determining your financial viability, look into the many different kinds of loans that are available for home renovation. According to the Nerd Wallet, there are several types of loans that many people use when buying a fixer-upper.
FHA loans require you to work with a contractor, while homestyle renovation loans allow you more flexibility. If you’re a veteran, you may be eligible for a VA loan, which could get you a lower interest rate than other loans. Look at the current average annual percentage rate (APR) to know how much you will ultimately pay for the loan. Luckily, there are apps that can help you calculate the cost of your mortgage. To get an idea of what you might spend, your agent can be a real asset in helping you survey the local market for average home prices. While you might not spend that much on your loan, having those numbers in front of you makes it easier to prepare a budget.
Prioritize projects
The first time you walk through the house, take an inventory of which projects are going to be the most difficult. Some work might be cosmetic, such as painting or yard management. For projects that will require a high level of investment, put these as top priority. You’ll also want to have the proper power tools such as drills, hammers and jigsaws for DIY projects. Think about what services you’ll need to hire if you’re looking to save time or are unable to accomplish these projects yourself.
And be cautious when it comes to hiring out contractors. A bad contractor is one of the biggest nightmares that many people run into. Consult with your agent, friends, neighbors and online reviews to find a contractor that will give you a fair price, perform high-quality work and get things done in a timely manner.
Living with renovations
Business Insider suggests that living in the fixer-upper while you work on it can help with monthly budgetary costs and give you time to plan renovations. Plus, living in your home during renovations can also be a trial period to help you determine whether to stay or sell once the work is complete. Take note that to ensure you’re able to live comfortably during renovations, it’s important to carve out a space that you can keep clean and where you can relax. Many of your belongings may have to be put in storage during this time, so it’s probably a good idea to assess and price units in your city so you can budget accordingly.
Use your negotiation power
The increased popularity of fixer-uppers has had an impact on availability. Look at inspection information that highlights work that needs to be done so you can get the best price. Your agent will be able to help you understand how to approach this, and carefully discussing repair contingencies can help you get the deal of a lifetime.
Plan for long-term
Each project may take a little longer than you think, but when you add the extra time for every project, it’ll probably take you longer than you anticipate. Working with contractors is often a source of delay, but if you’ve carefully vetted the contractor you work with, you probably won’t have too much to worry about.
Buying a fixer-upper can be a big gamble because of how much effort it will require and assumptions about the housing market. Work with an agent and consider the monthly costs, loan types and current average APR to make an informed decision. Careful and honest planning that accounts for the realities of the local housing market can help give you a financial edge and make the decision to buy a fixer-upper a satisfying and profitable choice.
When you’re reading to buy the fixer upper you’ll transform into your dream home, give the Engelman Real Estate Team a call at 515-446-2888 or stop by the website to contact us.