Buying a fixer-upper often comes with many challenges, but the finished product can be rewarding! For homebuyers, buying a fixer-upper can be a great opportunity to getting their dream home. However, there are many factors homebuyers should consider when purchasing a fixer-upper.
Related: Renovations that Add the Most Value to a Home
The Right Mindset
Renovating a home can take a substantial amount of time and money, so having a plan when considering the purchase of a fixer-upper is essential.
When purchasing a fixer-upper, having a budget is essential. A helpful tip is to factor in an additional 20% on top of the home buying budget for repairs.
Although homebuyers typically plan to do most repairs and renovations themselves, running into problems when renovating is not uncommon. Sometimes, homebuyers will need to hire a professional to help with projects, so it is necessary to include these costs into the budget.
Finally, homebuyers should understand that unforeseen circumstances could arise when it comes to fixer-uppers. Therefore, whether it be permit delays or bad weather, it is good to approach fixer-uppers knowing problems will most likely occur.
Expect a Chaotic Environment
Any homebuyer who plans to live in a fixer-upper during the renovation process will need to accept dust, noise, and disruption. Depending on the degree of repairs, the home could be a chaotic and challenging environment to live in for many months or more.
Homebuyers who work from home or have children may struggle under these circumstances. The sound of hammers and drills, workers coming in and out, and in some cases, the chill of a cold breeze from unfilled window frames are all typical problems that homeowners might face.
If living amid the dust and the banging of hammers is not appealing, spreading out renovation projects over time can help to minimize the disruption.
Choosing the Right Location
Choosing a fixer-upper home in a desirable neighborhood will prevent buyer’s remorse.
Seeking advice from an experienced real estate agent can help homebuyers find a neighborhood with all the attributes desired. Driving around target neighborhoods can also help homebuyers to become familiar with the surrounding amenities.
A good location with access to schools, shopping, dining, and parks will help to increase the after-renovation value (ARV). The ARV will also help homebuyers to determine whether the renovations and improvements on a particular home will give them a return on investment (ROI).
Get a Solid Home Inspection
Before putting in a bid on any home, homebuyers should get a home inspection. Professional home inspectors can locate flaws that others may not notice.
A thorough home inspection will give homebuyers an idea of renovation costs and the amount of work needed in the home.
Homebuyers can quickly fix cosmetic flaws such as peeling paint, outdated fixtures, and broken windows. First, however, homebuyers should focus on essential components of a home, such as:
- Electrical, plumbing, and sewer systems.
- Air conditioning and heating systems.
- Roofing.
- Foundation.
- Driveway, decks, or steps.
These are significant components of a home and can be time-consuming and expensive if needing repairs.
Choose the Right Kind of Homebuying Financing
Renovating a fixer-upper can be expensive, so it is vital to have the right financing. Most lenders offer home renovation loans, which allow homebuyers to add renovation costs to their overall mortgage.
However, home renovation loans are best for projects that will add value to the home.
Some of the home renovation mortgages that allow homebuyers to roll remodeling costs into the loan amount are:
- Fannie Mae HomeStyle Renovation loan.
- FHA 203(k) loan.
- Freddie Mac’s CHOICERenovation Mortgage.
- VA renovation loan.
The other option is for homebuyers to take out a personal loan to cover the costs of a renovation.
Related: 6 Basic Requirements to Finance a Home Purchase
Conclusion
Homebuyers will need to consider their budget, lifestyle, and timeline preferences before purchasing a home. Each property is different, so determining how big of a project homebuyers want to take on is important.
Homebuyers will need to consider the neighborhood and surrounding amenities as it helps increase the after-renovation value (ARV) of the home.
Buying a fixer-upper comes with its challenges, but the challenges can be rewarding in the end.
Marimark Realty
Marimark Realty, home to the top real estate agents in Tampa, Florida focuses on providing a personalized experience for buyers and sellers of real estate. As a full-service real estate agency, we help clients with luxury homes, homes for first-time homebuyers, commercial property, and investment property.
To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.