Purchasing a fixer-upper can save you a decent amount of money on the purchase price. How to Find an Affordable Fixer-Upper. A home in need of serious TLC can run into significant costs before it’s move-in ready. You need to ask yourself a few questions before deciding if buying a fixer-upper is the right move for you:
The perfect fixer-upper home has good, solid bones and needs more cosmetic work than anything else to shine. Ideally, an inspection will find that the foundation, roof, and other structural elements are fine.
When you hire someone to conduct the home inspection, it may be worth the expense (usually no more than $300) to hire a contractor to come along, too. The inspector and contractor will identify areas of concern and make sure that it is structurally sound.
They’ll also look for issues, like sagging floors, mildew, or water stains, that might indicate plumbing issues. Rewiring a house can cost between $3,000 and $20,000 or more. It makes sense if your home inspector’s unable to determine if the electrical system is in good shape, to hire an electrician to inspect the main fuse box.
You should know when the roof was replaced, and the age of the water heater and HVAC. If the property looks really run down, spend the money to hire a licensed roofer and specialists. Specialists could include pest inspectors and sewer line inspectors (if the home is really old).
Consider obtaining a roof certification and also asking the seller if they will pay for a home warranty, which is good insurance should things go wonky after you close. Make sure to request the seller’s disclosure, which is the best guide to knowing what repairs and renovations were done on the house. Should it lack detail, ask your agent to probe further for answers.
When you’re exploring financing, there are two options that work the best: a Fannie Mae HomeStyle Renovation Mortgage or a Federal Housing Administration (FHA) 203(k) rehabilitation loan, both of which allow you to purchase a home with additional money in escrow to use for renovations.
A variety of factors—annual income, down payment, monthly budget, and the current average APR—helps to determine how much house you can afford. If you’re going to purchase a fixer-upper, you’ll also need to factor in the budget you’ll need for repairs and renovations, including any tools you need for DIY projects; equipment like drills, power saws, and jackhammers can add a significant amount to your budget.
CNN Money and Investopedia recommend properties worth 2 to 2.5 times your annual income. MyMoney defines affordability as a multiple of your household or individual income and offers four different rules of thumb to calculate how large of a house to buy.
If you decide to strap on the toolbelt, don’t spend more on renovations than what your home is worth, or you’ll risk losing money. And unexpected surprises aside, take a lot of pictures during the process, try not to stress, and try to enjoy the journey.
Styl Properties, Inc. is here to help homeowners out of any kind of distressed situation. As investors, we are in business to make a modest profit on any deal. However, we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the honest truth about your home and how we can help you sell it fast to resolve any situation.
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