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Investing in a Fixer-Upper as a First-time Buyer Most first-time homebuyers are looking for a house that fully ready to be turned into a home. When you are dealing with the stress of purchasing property for the very first time, adding the stress of renovating a fixer-upper can seem insane. However, for those who are brave enough - and handy enough - to attempt it, this can be the secret to owning the house of your dreams. Here is all you need to know if you are considering taking the fixer-upper plunge.
Finding Your Fixer Upper
The first thing you need to do is find your dream fixer-upper. During this search, there are a few key considerations you should keep in mind: Location - Talking to The Guardian, renovation expert Michael Holmes says that the key to finding the perfect fixer-upper is to look for “the worst house you can find on the best street you can afford.” Try to look for something in your general area, as you don’t want to spend too much time commuting between the house and where you currently live. Condition - How much DIY are you willing to do, and how much money are you willing to invest? Know this before going in, in order to avoid overspending on renovations when the time comes. Price - For a fixer-upper to be worth it, it needs to be significantly cheaper than the average house price in the area. For instance, the median sales price for a home in Walnut Creek is $825,000. A fixer-upper in the area would likely be priced lower. Renovation Budget - According to CNBC, first-time homebuyers spend an average of $33,800 on renovations and that’s across all first-time homes, not just fixer-uppers. Bear this figure in mind to calculate the cost for every property you consider. Once you have narrowed it down, hire a contractor to give you a proper estimate.
Aside from a general home inspection, which is essential, there are several more specific inspections you may wish to carry out before buying. These will generally depend on local state legislation, the state of the house, and its location. You should also look into fixer-upper loans that can give you a significant boost in your renovation budget while integrating with your mortgage, such as the Federal Housing Administration’s 203(k) program. Another option is to take out a conventional loan. It’s possible to qualify for 15-year conventional loans with a down payment of only 3 percent, and this option is also more affordable than the loans offered by many government programs. It is always a good idea to get a comprehensive of loan officers from your Real Estate Agent. They know the area, and they have worked with these loan officers many times, so you know you are getting the best contacts.
Once you have bought the house, it’s time to roll up your sleeves and get renovating. Start with the bigger structural changes, if there are any, and work your way down to the cosmetic improvements. There is no point getting the paint rollers out until the more basic considerations have been done. The bigger projects are also likely to be more expensive and doing them first ensures you don’t overspend on the less important things. Make sure you have all the tools you will need before starting any DIY. Particularly, check all your power tools (drill, sander, jigsaw, etc.) are in order, and replace anything that needs upgrading. That said, be reasonable: Don’t buy an expensive tool when a simpler one will do the job just fine.
To Sell or Not To Sell?
Once you have finished your fixer-upper, you may be left wondering whether to sell it or move into it yourself. You probably had an idea of which you wanted to do when you bought it, but that may have changed over the months of work, money and sweat you have now poured into it. The answer to this question will depend on several factors. What is the value of your fixer-upper now? Could you make good money selling it and buying another house? Is the house right for your current and future needs, or would you have to move eventually? Your Real Estate Agent would be more than happy to help you answer those questions. Whatever you choose to do, transforming a fixer-upper house can be one of the most satisfying projects you ever undertake. It is a huge commitment, and you should proceed with caution throughout the process. But if you pull it off, you will ultimately get much more out of it than you put in.
Blog by: Erin Reynolds