Tips for Buying Fixer-Uppers
A "fixer-upper" renovation project is not for the faint of heart, inexperienced or impatient buyer. But if you are so inclined, there are some great opportunities to increase the value of the home. Here are some tips to buy homes that may need work:
- Avoid homes that need major spending on basics that are expected by buyers (i.e. "unprofitable repairs"): The home you choose needs to be structurally sound, up-to-code in electrical wiring, have sound major plumbing (no polybutilene pipes), and must not need foundation repairs. Correcting these issues may cost you a fortune and do not add value to the buyer.
- Prefer homes that need only cosmetic or updating details: Paint, carpet, flooring, maybe some kitchen and bathroom renovations to bring them up to modern appeal. These renovations will yield the best return on your investment.
- Purchase at least 20%-30% below the potential "repaired" or "updated' value. Look for sellers who are really motivated to sell and who CAN reduce the price because they have plenty of equity. Make sure that the purchase price, plus the renovation costs, plus the selling expenses still make sense, given your time horizon.
- Choose a desirable neighborhood with strong demand. There is nothing you can do to change the neighbors, the schools, the crime rate, the access roads or the location of the home.
- Prefer a single house with three or four bedrooms - these are the most common and marketable homes.
- Do not "over-capitalize" the home. Talk to your Realtor and make sure you know the current price range for the neighborhood. Do not build a Taj Mahal in a neighborhood where the highest priced sale is way below the price that it would take for you to sell the home and make some money. Buying the cheapest/smallest home in the best neighborhood usually gives you more room for improvements.
- If you are going to live in this home, look into financing the renovations using an FHA 203K loan, so you don't need to come up with the cash to perform the renovations.
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Tags: advice, repairs, charleston sc real estate, mount pleasant real estate, alan donald, additions, renovations, remodeling, buyer tips, sellers, keller williams realty, the alan donald real estate team, residential real estate sales, home sales, fixeruppers