Top 6 Tips to Buy a Fixer-Upper Minus the Downer
Thanks to Chip and Joanna Gaines behind the hit show Fixer Upper in HGTV, such properties are selling like the proverbial hotcakes in Waco, Texas. Anyone inspired by the husband-and-wife team is likely to be encouraged to dip their hands into such a real estate investment as well.
After all, it offers some obvious advantages, such as a lower asking price, fewer competitors, and a personal satisfaction for when the repair work is finished. Moreover, there is a huge potential for resale profit for such properties.
To ensure you get good returns, however, you should know a few tricks of buying fixer-uppers.
Guide to Buying a Fixer-Upper
1. Choose the right property
By right, it means houses that are marketed as “all offers considered”, “willing to negotiate,” and similar phrases.
Although foreclosed homes are ripe for flipping, banks and lenders will not accept a lower price even if they need to cut their losses. They have already lost too much, after all. So steer clear of foreclosed homes and choose fixer-uppers from sellers who are willing to negotiate.
Seek help from local real estate agents who know the ins and outs of the market and the industry. Ask them for a comparative market analysis to get the most comparable price within a particular location.
2. Pick one from a saleable location
A fixer-upper in a desirable location guarantees a profit once flipped. A sought-after neighborhood can drive saleability, after all.
So make sure to examine the surrounding properties, how the homes are maintained, the neighboring exteriors, and its conformity with the rest of the area. If it is located in a mostly owner-occupied housing, for example, does it appear to conform?
3. Opt for one with the best configuration
If you want good returns on your investment, flip a 3-bedroom house with a couple of baths or more because it appeals to the largest pool of prospective buyers. A two bedroom is also profitable. But people looking for something better almost always purchase a 3-bedroom house.
4. Consider the layout
The best fixer-upper should have a layout that flows. For example, the master bedroom should be on the first floor of a two-story house while the rest is upstairs. If you want to market a property to young families, the bedrooms should not be on opposite ends of the house.
If you need to move and break down walls to make this happen, repairs and renovation will become expensive, rendering your project impractical.
5. Major or minor?
Think long and hard if you can afford to tackle a home requiring a major renovation. If you only have enough for minor cosmetic improvements, then adjust your expectations and shop only for the fixer-uppers that meet your budget and the amount of time and energy you are willing to spend on a project.
To give you an idea, some of the easy and inexpensive fixes are painting, patching walls, installing new light fixtures, fixing broken windows, adding a deck, replacing doors, and refinishing floors or laying a carpet or new tiles.
The more expensive fixes, on the other hand, include tearing off and replacing the roof, shoring up foundations, replacing all plumbing, installing window replacements, and replacing the HVAC systems.
6. Estimate the cost of renovation
When shopping for a property that needs repairs, there are 3 things you must look into – price of initial purchase, costs of repair and renovation, and expected sales price if you intend to sell it.
To get as much of your investment as possible, make sure to deduct from the asking price the renovation costs. Or, check if the purchase price is already adjusted based on the expected expenses.
Do the same if you want to offer a price for such a property.
Make sure to take into account other expenses, such as building permit fee, fluctuations in the price of building materials, and cost of specialty insurance.
With these in mind, buying fixer-uppers will be less daunting and more profitable.
When time comes for you to have a property fixed, make sure to choose the right building contractor. One that provides high-quality services at the best price. On that note, check out reviews before you decide who to hire.