Whether you buy fixer-uppers to renovate and then flip them to make a profit or are looking for a property within your budget to make into your dream home, fixer uppers offer several advantages. A realtor who specializes in finding clients great house deals can point out the advantages of purchasing a fixer-upper home as well as what fundamentals to look for in a home in need of major repairs or updates.
Key Advantages of Buying a Fixer Upper
Lower sales price. If you are looking for an affordable home within your budget and don't mind making do-it-yourself home improvements, you can buy a home at a huge discount – often a foreclosure for much less than the property is worth. The money you save on the sales price, you can invest in making repairs or renovations.
To help determine whether you are making a good investment, your real estate agent can tell you how much you would have to pay for the same house if it was in good condition or fully renovated.
Instant equity. Getting the home for below its assessed value gives you equity in the property before you make the first improvement. Renovations you make after buying the property build even more equity in the home quickly.
Fewer buyers competing for the home. Less competition gives you the opportunity to get more of what you want in a home at a lower price. While not everyone has the budget to invest in major renovations, other home buyers don't want to take the time to fix up the home, especially if they have to live in the house while making the renovations.
Availability of rehab mortgage loans. If you want to buy a fixer-upper you plan to live in that requires extensive renovations, you may qualify for a lower-rate mortgage loan guaranteed by the Federal Housing Administration (FHA) under the HUD 203(k) program. Once approved, you will get enough money to purchase the property and pay for the remodeling expenses.
Profit at resale. Even if you don't plan to resell the home immediately, take the time to think about how much profit you could make on the property is before you buy it. If you decide to sell later on, you want to show potential home buyers that the home has been well maintained without overdoing the renovations. Pay attention to what the other homes in the neighborhood have to offer to avoid undertaking renovations where the costs are more than the value they add to the home.
Factors to Consider Before Buying a Fixer-Upper
The condition of the home. The extent of renovations a home needs helps determine how much profit you can make if you sell the property in the future. If you can't afford to make massive renovations, some fixer-uppers need only cosmetic improvements, such as repainting the exterior and refinishing wood floors, which will cost you less but still increase the value of the property.
The location of the home. No matter how cheaply you can buy a home, a home located in a safe, desirable neighborhood will appeal to more potential buyers if you want to sell it later. More home buyers are looking for homes away from busy streets but located near work and school. Many home buyers also are looking to live within walking distance to stores, restaurants, and recreational activities.
The structural soundness of the home. Major renovations to make a home habitable can cost a lot of money. Even if you are willing to invest in the necessary repairs, before you can know what you are up against, you need to know the condition of the roof, windows, electrical wiring, plumbing and sewer lines, and heating system. Water damage, foundation cracks, rotted beams, and termite damage are other situations that can be huge expenses to correct.