A fixer upper house is an excellent investment if you want to buy a house at a cheaper price point and don't mind spending a little money renovating and repairing. Of course, it is crucial that you consider any hidden costs, such as water damage or faulty heating and cooling.
Did you know that it could cost upwards of $10,000 or more to remedy water damage, depending on its severity? To make sure your fixer upper project goes as smoothly as it needs to, continue reading below! This brief fixer upper house article will cover the advantages and disadvantages of purchasing a fixer upper home and who you can reach out to find the perfect project!
What Is a Fixer Upper House?
A fixer upper house is a home that is in a not-so-excellent condition that you can buy at a significantly discounted price. Although the house is cheaper than most houses on the market, it comes with many repairs. Most of these homes are run-down, abandoned, or outdated, so you will have to conduct repairs to bring the house back to code before you can live in it.
Fixer Upper House Benefits
One of the most significant benefits of a fixer upper house is its cost. As mentioned earlier, a fixer upper house is cheaper than a traditional home, but you do need to account for the costs of repairs if you decide to purchase a house to fix up.
Less Competition
When you purchase a home the traditional way, you typically have to worry about being outbid. With fixer upper homes, the pool of candidates shrinks significantly.
You may have to bid against real estate investors who want to purchase the house to fix and flip for a profit, but in general, you won't have to deal with too many people. The demand for a fixer upper is less than a traditional house in the market.
You Can Secure a Loan
There are certain loans you can secure to purchase a fixer upper house. For example, you can secure a hard money loan. To get a hard money loan, you must go through a private lender, as traditional banks and credit unions do not authorize hard money loans.
This is because conventional lenders must follow strict guidelines before they release a home loan. With a hard money loan, you can qualify so long as you meet the credit requirements and have at least 20% to 30% of the fixer upper house's purchase price. Of course, each private lender has underwriting rules, so make sure you reach out to them before applying.
You Can Customize How You Want
Instead of spending days touring potential homes with everything you want, you can just build it for yourself. You can create that massive walk-in closet or customize the bathroom to include a vanity. You have the opportunity to build your very own dream house.
Disadvantages of Fixer Upper Houses
Although there are fantastic benefits that come with buying a fixer upper house, there are a few disadvantages you should keep in mind before you make your final decision.
For example, although the house is cheaper to purchase, you must consider the repair cost. You have to pay to customize the house to your liking, and depending on the home's condition, you may have to pay for an inspector to come to ensure that the house meets building code standards.
Fixer Upper Projects Can Take Months
Depending on the condition of the house and the type of repairs needed, you can expect to spend months working on the home. You may have to live with friends, family, or another rental property during this time. If you don't want to spend months, or even a year, repairing and renovating, you may want to purchase a home with everything you want.
Possible Hidden Issues
You may uncover broken pipes or some huge electrical wiring problem during the renovation process. This can cost extra money and add more time to your project timeline. If you decide to go the route of buying a fixer upper house, make sure you factor in any additional costs in your budget.
Fixer Upper House Tips
A fixer upper is a fun project that has its possible ups and downs. To make sure your project goes as smoothly as it possibly can, there are a few tips you should keep in mind.
Create a Business Plan
Popular to contrary belief, a business plan is not only for startup businesses or for purchasing a new building lease contract, but it is also essential for a fixer upper house. You can use the business plan to plan out how you wish to use your lender financing for repairs. It helps guide you to make sure you stay within budget.
Interview Your Contractors
Although it may seem tempting to work with the cheapest contractor, you find online, that is heavily advised against. Make sure you interview your contractors and look into their previous work.
There have been instances where a contractor has stopped work mid-renovations without warning, or someone had to fire them because they weren't properly doing their job. To avoid spending more money than you need to, it is best to vet out your contractors before signing any contracts.
Communicate Your Needs
In addition to using a business plan or some other sort of plan to map out the needs of your fixer upper, it helps to communicate with your contractors. Make sure you either verbally tell the contractors the details of what you need or write it down so they can follow your instructions.
Know When To Hire Help
Sure, there are a few things you can do on your own, such as painting the walls or adding in that new closet, but for other things, you may want to call in the professionals. Even if you have a good idea of how to add in that closet or break down that wall, it helps to bring in someone with a license and experience.
If you have any electrical issues or work needed, you definitely should bring in a professional. If not, there is a chance that improper wiring could cause a potential fire or ruin the project entirely.
Can I Hire a Real Estate Agent?
Yes! If you can most definitely partner with a reputable real estate agent to find your fixer upper. Not all fixer upper homes are entirely in need of demolishing and extreme renovations; some are just outdated and need some small repairs.
Depending on how much work you want to put in, you can ask your real estate agent to help you vet the right property for your needs. They also can help you get connected to the right contractors if needed. These agents have a vast network of people they work with, so they can point you in the right direction.
Should I Buy a Fixer Upper?
If you have the time and resources to handle fixing up your fixer upper, then you can buy a fixer upper. Of course, everyone's situation varies, so what may work for one person may not work for you.
Make sure you take your budget, needs, and lifestyle into consideration before you purchase a fixer upper. If you are a first time home buyer, buying a fixer upper may not be in your best interest, depending on what you're looking for. If you want to purchase a home to build, you can work with a real estate agent to discuss your options; that may be the better route for you, depending on your needs and financial situation.
If you are purchasing a fixer upper as a real estate investment property, make sure you stay within your budget. Look at comparable homes in the neighborhood and compare the cost of those homes to the potential selling price of your fix and flip. If it fairs out well, it could be an excellent real estate investment project for your portfolio.
Help With Finding a Fixer Upper House
If you've made the decision to move forward with a fixer upper, it helps to create a solid plan. Please make sure you properly plan out how you intend to spend the money you've saved or received from your lender to make sure you don't go over budget or drag out the process longer than it needs to be. If you are ready to find the perfect fixer upper, check out our website today to see what is available for you!