After asking yourself, “What price house can I afford?” If the answer isn’t in line with the type of home you had in mind, you might start thinking about buying a house that needs some work at a lower price. That idea is a popular one among millennials, with more than two-thirds stating they’d be interested in a fixer-upper, according to one recent survey.
Because they need improvements, houses that need work are usually priced at a discount, and you probably won’t have as much competition, weeding out many buyers who can pay for homes that are move-in-ready. What happens after purchasing can end up making it a good decision, or a nightmare. The secret is knowing how to do it right.
Location, Location, Location
Remember, not all fixer-uppers are worth fixing. If you don’t plan on staying in the home for the long-term with hopes of selling for a profit, it has to have potential and not all ugly ducklings can be transformed into a swan. Location is a key factor – buying a home on a high-traffic street, across from a landfill or next to anything that can potentially mean a lot of noise like a school, sporting or music venue, is usually a bad idea. Even the best houses can be hard to sell – and miserable to live in, when the location isn’t right and that’s the one thing that can’t be changed. The neighborhood itself should be tidy, not rampant with crime and most homes well-cared for.
Realistically Evaluate the Condition
Some issues are worse than others, so it’s important to take a good hard look, evaluating the home’s condition and separating fundamental issues from cosmetic ones. Some of the things that are easy and relatively inexpensive to fix include repairing broken windows, patching walls, painting, replacing doors, installing new light fixtures and laying tile or carpet, or refinishing floors. On the other hand, reroofing, fully remodeling a kitchen, replacing plumbing or HVAC systems, and/or building a garage or any addition, is going to be a lot more expensive.
Consider a Renovation Loan
By considering a renovation loan, you might be able to get financing for a house and make improvements at the same time. It allows you to pay off improvements over a longer period of time, and at a better interest rate than other financing options. Renovation loans are offered through the Federal Housing Administration referred to as FHA 203(k). Others include the CHOICERenovation loan guaranteed by Freddie Mac; HomeStyle loans, guaranteed by Fannie Mae; and the Department of Veterans Affairs VA renovation loans.
These loans may also help cover your monthly mortgage payments if you have to live somewhere else while the improvements are being made.
No matter what the real estate transaction, an inspection performed by a credentialed home inspector is a must before signing the dotted line that commits you to completing the sale. There are many different types of home inspections, with the cost essential for getting a good deal. Those include an engineering report, pest inspection, roof certification (if the seller hasn’t provided evidence as to its condition and age), and a sewer line inspection.
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