There's money to be made in the fixer-upper space. Take a look at your priority list of considerations as a fixer-upper homebuyer. Is buying a fixer-upper something you're prepared to take on?
If you’ve watched any amount of HGTV between 2013 and now, you’re well aware of the potential tens-of-thousands awaiting you on the other side of a fixer-upper project. But is buying a fixer-upper a realistic undertaking for you?
Buying a house that needs cosmetic work is different from a fixer-upper. As you tour homes, try to see past the cosmetic issues and focus on what really hits your wallet:
- An average foundation repair project rings in around $4,000
- Replacing single pipe features (like a sink or tub) can cost up to $2,000
- The national average price for rewiring a house lands at $2,100
- The average price for roof replacement is just over $7,200
- Reflooring a home runs just below $3,000
… and that’s not a complete list. Those are just some of the more common issues that you may run into with a fixer-upper.
Your main priority is ensuring that you can afford a project that doesn’t go according to plan. Then you’ll need to find trusted local contractors, a timeline, and an exit strategy if you plan to move out after the renovations. How much profit would it take to make the project worth your time?
Buying New Homes vs Fixer-Uppers
Having a new home built, or even just buying an already-existing home in good shape, provides a peace-of-mind that won’t be there when you buy a house in poor condition. With a new home, you choose a reputable builder, select options, and watch it come together from the ground-up. The obvious downside is cost.
Fixer-Uppers: The Downsides
Fixer-uppers come with timelines and renovation budgets. Are you okay with living in a home while renovations are being done? Multiple contractors may be using loud tools throughout the day. If you work from home, this could wear your patience. The lack of privacy may also earn a spot in the wrong side of your pros and cons list.
Be prepared to go way over your allotted time. Also, remember to include timing of any licenses and permits you may need in your plan because sometimes these take a lot longer than you would expect.
Angel and Andrew Goon•
You’ll have a lot to learn. You don’t have to know perfect technique for all the manual labor required. But you should know enough to know when contractors are pulling your leg. Determining a fair cost for large home repairs can be tricky business unless you already have trusted contractors.
There are possible hidden risks. If you read stories from first-time fixer-uppers, one of the most predictable storylines goes something like this:
I paid $45,000 for the house, and started rehabbing it. Once we pulled up the bathroom floor, we had to do the next room, and then the next. turns out the crawl space underneath was never sealed, so all the moisture rotted the beams… if it wasn't for my father being the handiest person I know, and having a cousin who's a carpenter for a living, I would have been totally screwed.
Fixer-Uppers: The Upsides
There are financial upsides to a successful project. 20% gross profit margins aren’t extremely uncommon in the flipping world. If you’re living in the home, it’ll save you money upfront.
The process can be creative and rewarding. If you enjoy taking command of a project and seeing it through to the end, you may enjoy flipping houses. You’re the boss; you’re the investor; you’re any role you want to be.
Probably the smartest thing I did along the way was to form a house working group with my friends… We all had different skills (carpenter, electrician, plumber, tile worker etc) so when we got together it was an unstoppable force…
It may be your only way to purchase a home in an expensive area. Homes near downtown Austin are out of reach for most folks. They’re more attainable than buying a home in the Bay Area, but even if your budget is $300,000, you’re probably hard-pressed to find anything at 2,000 square feet.
Need help making a decision?
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