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Buy & Sell Fixer Upper Homes
Get Your Budget To Work On Your Fixer-Upper Home
The idea of a fixer-upper being able to fetch a price at least double its purchase price really is an irresistible idea. Buying a fixer-upper can still leave you stung if you don’t know what you’re doing. So take note of some of these pointers to make the purchase of your fixer-upper home pay off.
1. Figure out how much you should pay to buy the house using this simple formula:
- Based on an extensive assessment of the house’s condition, sum up the costs required to renovate it (remember to factor in materials and labor).
- Using real estate prices of the house’s location, subtract the repair costs from the house’s market value after improvements have been made.
- After that, subtract another 5 to 10 % to cover unexpected factors in the process of fixing up the house.
The amount that you have come up with should give you an idea of what you should offer to buy the property.
2. The best fixer-upper projects are those that basically need decorative improvements (paint, floor finishes, lighting fixtures, window shutters). These items cost less but bring in more value when implemented.
3. Paying for the renovation can be quite tricky, especially if the repair estimates are extensive.
Credit cards are an option for small projects. However, consider the interest rates because these can rack up over time. Taking out a loan against your retirement plan or life insurance policy may finance your repairs and interest rates are comparatively lower. However, the interest from this isn't tax-deductible.
Of course, the most common funding for a fixer-upper is a renovation loan from a mortgage or a home equity credit line. A loan of around 90% of the equity of the owner’s house after repairs have been made is usually available for lending.
4. Off the bat, whatever kind of work is needed, you can save if you contribute to the repair work. If turning a profit is your intention, then cut down on labor costs, which eats up a significant portion of your margin.
If you aren't the handyman type, just make sure you are there to give constant supervision. The last thing you want to happen is to come back to find the job done with the wrong specifications or that delays have been incurred – which costs more money.
As you start your fixer-upper home, don’t be afraid to go over your budget several times. When you’re confident with the figures, stick to it. Keeping within budget will spell the difference between a so-so deal and a great investment.
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