Why this could be a great option for first-time homebuyers
We’re now about a decade removed from the housing crisis, and while things have improved significantly since then, many would-be homeowners are still struggling to find a home they can afford. Much of this is due to high prices combined with a low inventory of houses. So, what can someone do if they’re tired of renting but their dream house is out of reach? They can think about buying a home that needs a little TLC.
Why buy a fixer-upper?
There are many reasons to consider a home that requires some repairs and upgrades, such as:
You get to have a house
The most obvious reason to go with a fixer-upper is that it’s usually easier to become a homeowner this way. If you have a less-than-stellar credit score or don’t have much money for a down payment, neither of these things should be huge obstacles.
The cost is lower
Because they need work, fixer-uppers are generally cheaper than even similar homes in the same neighborhood. Depending upon how much work is needed, the price could be substantially lower.
You immediately start building equity
The moment you fix up one thing in your home and raise its value, you’re building equity. And while you probably won’t be thinking about selling for a while, if you eventually do, all the work you put in will come back to you as a nice return on your investment.
You could qualify for a renovation loan
With a renovation loan, you may be able to get the funds you need to fix up your home. Some programs — like FHA 203(k) — will give you money based on the future value of your home after improvements are made, which will let you borrow more. Plus, this type of loan can be used to also cover mortgage payments.
The house can be altered exactly to your liking
A move-in ready home is great, but let’s face it: You’re basically moving into somebody else’s home. Sure, you can do things to personalize it, but if you don’t have a big budget for improvements (and after buying a new house, who does?), your options are limited. With a fixer-upper, however, you have a golden opportunity to immediately make customizations. You get to decide on materials, appliances, colors, and other features.
5 things to keep in mind for your fixer-upper
Buying a fixer-upper may seem like the ideal way to get a home, but be sure to think about these things before making a decision:
Perhaps the most cliché word in all of real estate, location is nonetheless something that must be considered. It’s important to picture yourself living in your home for the next decade or longer. That means it should be in a good neighborhood or at least one that’s showing signs of improvement. Look at the crime rates and local school rankings. Remember that an extremely cheap house probably won’t be worth renovating if it’s in an undesirable part of town.
From some basic repairs to a complete renovation, the work needed to fix up fixer-uppers can vary widely. You need to know exactly what you’re getting into and how much time and energy you are willing to put in. No matter how the home looks, it’s essential to be sure that the overall structure — including the foundation and roof — is in good shape. Things like refinishing floors, adding light fixtures, replacing broken doors or windows, or patching walls are relatively easy jobs. But when a home needs new plumbing or electrical systems or a complete kitchen remodel, for example, clearly these are expensive and time-consuming projects.
While some things may be obvious, you won’t truly know everything you need to know about a house until it gets a thorough inspection from a professional. He or she can look at every inch and give you unbiased information about leaks, mold, pests, and other things that may be hidden. This will give you a good idea of what you would need to do — and how much you would need to pay — to make improvements.
How much do you have to spend or how big of a loan are you willing to take out? That’s a key question to answer when deciding what type of fixer-upper to buy. Of course, in addition to the renovation work, you need to factor in the cost of the house itself. The more fixing up a home needs, the lower the asking price will probably be, but that also means more extensive (and expensive) repairs. It’s also a good idea to plan to spend more than you think you’ll have to. Remember that an estimate is just that, and a good rule of thumb is to expect the final costs to be 10% to 15% higher.
Renovations can take a lot of time, and, again, one of the factors to consider is how much work is needed. If you won’t be able to move in for a while, you have to think about where you’ll be living in the meantime. In many instances, people need to keep renting until their home is ready, and that is another expense that must be factored in.
While buying a fixer-upper isn’t for everyone, if you’re currently being priced out of the housing market, it could be the right move for you. To make sure you get expert repairs and installations, you can rely on Tandem Contracting. From a bathroom or kitchen remodel to wiring, we can do it all. For a free quote, call us at 973-864-3100 or just fill out our online contact form.