If you’re addicted to TV shows like “Property Brothers” or “This Old House” you’re probably tempted to buy a fixer-upper and renovate it to perfect condition. While that’s certainly possible, it’s best to go into a renovation with your eyes wide open before you open your wallet.
Here are some tips to make your remodeling dream come true rather than your worst nightmare:
- Evaluate yourself first. We’ll get into the neighborhood and the property next, but before you even begin to look at properties you need to be realistic about what you can accomplish yourself given the skills you have and your time. If you love to paint and decorate, you may want to restrict yourself to cosmetic work on your home. You can still buy a home that requires more renovation, but recognize that you’ll need to identify good contractors and finance their work.
- Look into financing options. Meet with a lender before you start your home search so you can establish a budget and understand your options for financing your home purchase and your renovations together. The Federal Housing Administration offers FHA 203k loans so you can wrap your costs together with a down payment as low as 3.5 percent. An experienced lender can discuss the details of that loan program with you as well as the Fannie Mae Home Style loan program which is similar but requires a larger down payment. Determine your comfort level with your housing payment and learn how these loans can make a fixer-upper an affordable proposition during a free consultation with a lender. Lenders who handle a lot of these loans can also help you find contractors who have worked with other borrowers.
- Check out the neighborhood. While fixing up a property can be a great investment, you always need to be careful about not over-improving your home compared to others in the community. A good Realtor can talk to you about local home values and discuss the pros and cons of various homes.
- Look for a home that meets some of your needs. Just as you wouldn’t buy a dress that didn’t fit at all and then have it completely torn apart and tailored, you shouldn’t buy a house that doesn’t have at least some of the things you want. In particular, it’s important to check out the floorplan and see if it meets your tastes. If you love a kitchen that overlooks the backyard, don’t buy a house with a front kitchen. Moving a kitchen or other major structural work can be wildly expensive and in the end probably not worthwhile. On renovation shows on TV they often show people knocking down walls to create an open floorplan, but beware: houses also have structural walls that can’t be moved so make sure you know what you can and cannot do.
- Get a detailed inspection. A home inspector is always important when you buy a home, but when you buy a home that needs work it’s even more vital. You may be prepared to redo the kitchen, but you don’t necessarily want to replace all the plumbing and electrical systems in the home or replace the roof. An inspector can look for flaws and talk about potential future repairs as well as give you an estimate of how long some of the systems and appliances in place could last. As a buyer, you’re probably looking at the size of the closets and the state of the kitchen and bathroom to see how many projects you need to take on, but an inspector can look for the hidden issues that could cost you big bucks like water damage or a problem with the septic system.
- Get an estimate from a contractor. Once you’ve identified a home that you think is promising, bring in a general contractor who can give you a written estimate for all the repairs and projects you want to do. Ask if you’ll need a permit for any of the work and how much the permits will cost. If you’re having structural work done, bring in a structural engineer to find out how much that will cost. You and your contractor can talk about various options that could be less costly and weigh your choices of projects to do immediately and those that can wait for the future. Keep in mind that when interest rates are low and you’re wrapping your costs into a 30-year loan you may be able to tackle a more expensive project than if you had to pay cash or finance it separately with a short-term loan. Be sure to add an extra 10 to 20 percent to your estimated budget as a cushion in case other issues are uncovered during your renovation.
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Michele Lerner is a freelance writer with more than twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her work has appeared in The Washington Post, NewHomeSource.com, Realtor.com, Bankrate.com, Insurance.com, HSH.com, The Washington Times, NAREIT's Real Estate Portfolio, and numerous Realtor association publications. Her latest book, "New Home 101: Your Guide to Buying and Building a New Home" and her first book, "HOMEBUYING: Tough Times, First Time, Any Time" are available now at Amazon.com or from MicheleLerner.com.