With the relatively low inventory of homes for sale these days, a move-in ready home can be hard to find, especially if you’re on a budget, which is why a fixer upper may be appealing if you are looking to get into a particular neighborhood or hot area. But before you start bargain hunting, you need to know what you’re in for — renovations aren’t as easy as they may look on TV.
What will it cost to purchase, how much will it cost to improve, and what will be the future return? With the right agent by your side, buying a fixer upper can be a great investment, but it’s important that you are prepared and know what to expect.
1. Think about true costs and the need (if any) to budget for big-ticket items before any minor cosmetic updates or changes — roof, mechanicals (HVAC, water heater), electrical or plumbing updates, and large kitchen, and bath upgrades. Always budget 10% more for unforeseen costs/repairs that may arise.
2. Talk with your lender to choose the best mortgage product to help fund the renovations. Many lenders offer “renovation loans” where you can fund the home updates without having to have bulk cash set aside. With a renovation loan, you can pay off improvements over a longer period of time and at a lower interest rate than other types of financing or personal loans.
3. Get a home inspection! It might sound obvious, but many homebuyers are waiving home inspections thinking that they could never get one. You can get a home inspection AFTER you purchase, or you can consider a “walk and talk” inspection during a showing. If you didn’t get a full set of professional eyes on the property (contractor, engineer, electrician, plumber) then it would be a smart decision to get one for accurate budgeting and projections.
Move-in ready or a fixer-upper, I’m ready to hear what you’re looking for!