With home prices continuing to rise, new construction may be out of the question for some of today's homeowners. So, they turn to older homes in need of a bit of TLC instead. Those HGTV shows make it look like fixing up a home is easy and even fun. However, the reality of owning a property like that is quite different. Whether you wish to buy a home, fix it up, and sell it or simply want a "bargain" that you can make your own, you need to know a few things before you invest in a fixer-upper.
The Reality of Buying a Fixer-Upper
Worst Home, Best Neighborhood
They say that real estate is about location, location, location. So, experts suggest that you look for the worst home in the best neighborhood when it comes to a fixer-upper. Anything priced 20-25% under a comparable property in good condition is a great place to start. When looking at comps, look at cost-per-square-foot as well as how many bedrooms/bathrooms each home includes.
Cosmetic Changes = Good. Major Problems = Bad.
Stay away from issues like foundation problems, water or fire damage, or mold. Leave those to the more seasoned professionals. Seek out Tucson homes in need of cosmetic changes (updating the kitchen, bathrooms, flooring, or paint/wall treatments). These cost much less to fix up.
Consult a Contractor
While some home improvement projects can be completed yourself, larger projects may require a professional. That means hiring a contractor. But before you put in an offer, ask a contractor to look over the property and provide you with an estimate. Then, add at least 3 to 5% (or a little more for bigger projects) for your contingency fund. This helps cover any unforeseen issues that may arise. This happens more often than you might expect.
Do the Math
Once you find out the cost of your renovations, add that to the price of the Tucson home. Make sure those costs do not exceed the value of the home once your renovations are completed. Ideally, you want the total cost of the home and any improvements to fall below what you would sell it for. Remember, though. If you need to rent a place while you renovate your fixer-upper, you must also factor in those costs.
Create a Budget and Stick to It
It is really easy to get super excited about your renovation project and overspend on materials and finishes. Instead, create a budget and stick to it. If you need help financing your renovations, consider an FHA 203K or a Fannie Mae Homestyle loan.
Rebecca Schulte, Schulte Real Estate Group, Your Source for Tucson Real Estate
