We often get told how crazy we are for taking on such huge projects – and there may be a tad of truth to that. However, a lot of thought and consideration went into both of our big renovations. It comes down to not only the house itself, but the neighborhood, the reason why you are purchasing a fixer upper, and ultimately the buyer themselves.
10 Things to Consider when Purchasing a Fixer Upper
- Return on investment. Could the neighborhood support a higher value for the home? If you’re looking to fix up the ugliest or smallest house on the street, that’s a no-brainer. The likelihood that you will be able to sell the home at a higher price because of your upgrades is high. However, if you are looking to purchase a home that is relatively equal in size, quality, character and features, you may have a hard time getting much more for your house during resale. This is also know as pricing yourself out of the neighborhood. Our first fixer upper happened to be directly across the street from the nicest house in the neighborhood , so we had a lot of room for improvement and financial gain!
- Cosmetic upgrades vs. foundation repair. It’s important to understand the differences between cosmetic versus foundational upgrades and repairs. Cosmetic would be things like replacing or updating cabinetry, countertops, flooring, paint, fixtures and lighting – all of which can be done on the smallest to the largest of budgets. Foundational repairs such as roofing, plumbing, electrical and actual structural repairs are costly and can quickly chip away your renovation budget. Our projects have been a large mix of both.
- Budget. Do you have the resources to complete the projects you have planned, as well as at least a 20% contingency budget for unseen issues. In our case, we’ve almost doubled both of our original budgets, however we also added many projects along the way.
- Time. Do you have the time to wait on a home to be finished as well as the time it takes to either manage or work on the project yourself?
- Your ability to stay flexible. If you are the type of person that gets upset when plans go awry, taking on a fixer upper may not be the best idea. Even the most thought-out renovations have surprises, usually of which come with a cost – whether it’s time, money or both. If you can take on a fixer upper knowing that you will uncover projects that weren’t original planned for, you’ll be in good shape.
- Vision. You don’t necessarily need it yourself, but someone needs to have the vision to see passed the ugly red carpet and small closets. If all you see is a horrible house and if you can’t imagine it looking any other way, a fixer upper may not be for you. Renovations take imagination and a bit of faith.
- Help. Do you have friends and family that would be willing to pitch in on the projects if you are DIY – or have you identified a trust worthy contractor that will run the project on your behalf?
- Living situation. Will you have to live in the home while it is under renovation, or will you be living elsewhere (family, current home, etc.). We have been through both, and living at the home during renovation can be difficult. It was also during a time when we didn’t have children.
- Goal. Is the fixer upper an investment to flip quickly, a rental home for income or is it your dream home that you will live in for years to come? If it is a fix and flip, you will probably want to focus mostly on the cosmetic details and only invest in upgrading the structural items that are deficient today – versus items that have time left on them (i.e. water heater, roof). If the house will be an income property, you want to make sure the upgrades are either durable or easy to replace or repair in the case of bad tenants (i.e. carpet). If this is a house that you only plan to live in for a short to medium period you may want to upgrade the basics that will add value but not break the bank. Also try to focus on styles that potential buyers would like that do not seem too trendy. Finally, if it is your dream home, the sky is the limit. A lot of the project you will be doing will open doors to other project that would be easier to do at the same time versus waiting 5 years (if budgets allow of course). For example, we are re-stuccoing our entire house in smooth stucco, so now is the time to add any outside features to get them all stuccoed at the same time.
- Your gut. After pouring over all the details and financials, always do a gut check. While any good thing is worth some risk, sometimes you have to take the gut feeling that this one may not be right, and to keep on looking. On the other side, you may not have it all planned out, but are ok with figuring things out as you go because it’s an opportunity you can’t pass up.
The decision to buy and renovate a fixer upper can be difficult, but it is also extremely rewarding! Being a part of such a huge transformation comes with it’s rewards – both emotionally and financially.
Happy house hunting,
Brandon & Summer