Maybe you’ve heard the buzz lately around Chip and Joanna Gaine’s show on HGTV Fixer Upper. This fun loving couple finds older homes that are sometimes almost too destroyed to even walk through, and turns them into beautifully updated homes for their clients. Another show that has put the “fixer upper” trend on the radar is Rehab Addict with Nicole Curtis on HGTV. Nicole is “addicted” to home-restoration, specifically historic structures in Michigan and Minnesota that have been neglected for years. Curtis buys the properties, many of which are in the Twin Cities, and brings them back to life.
This “fixer-upper” trend is becoming very popular, with many people choosing to take on the challenge of completely updating an eyesore home on their own. And while this can be a fun hobby for many and can even raise the property’s value, there a few Dos and Don’ts for potential investors looking to buy one of these homes.
DO: Get a home inspection
You’ve spotted a crusty old home, but it’s in a great location and appears to have good bones. You’ve got your mind set on buying this home for cheap and putting a lot of money into fixing it up, so you figure you can skip the home inspection. You know there are issues, you’ll just fix them, right? Some of these repairs, like broken stairs, are easy to see. Others, like water damage in the basement foundation, can be easily hidden. The only way to know for sure what you’re buying is to have the property inspected by a professional home inspector.
DON’T: Underestimate the costs of hidden flaws
Those same hidden flaws that your inspector should be finding for you during the inspection can cost a lot. It is important that you are prepared for the costs of these repairs when factoring in how much you will initially be willing to invest in this home. Problems with the foundation, structure, roofing, and siding can be expensive to fix, as can major replacements with sewage, septic, and heating, ventilating, and air-conditioning systems.
DO: Guesstimate your renovation costs
It’s time to do a little research and bring out your calculator—you’re going to want to do some repair estimators before you invest in this home. Check with friends, co-workers and family to see if they’ve done repairs lately and could tell you how much they cost. This will help you determine whether the repairs you need would fall within your budget. Draw up a reference sheet for renovation costs such as roof, foundation and windows to help you determine your offer price.
DON’T: Assume you cannot ask for a lower price
The good news about buying fixer uppers is that you can often get these homes for as little as 60-80% of the asking price! If you can offer cash up front or this home has been sitting on the market for a while, your chances of having a lower offer accepted typically will increase. Break down your expenses when you offer lower than asking price to help sellers understand the time and resources you are going to have to invest in this home.
DO: Get the right loan
A home requiring major renovations can qualify for a special type of financing called a renovation loan. Since these loans are backed by the government, lenders are fine accepting lower interest rates than what would be required by your typical home renovation loan. There is a limit to how much you can borrow, so be sure to explore all your options with your Realtor or other qualified experts.
DON’T: Go at it alone
Real estate agents have the knowledge on repairs, home values and more—they can help you with the home buying process, even when it’s a fixer upper. They can help you negotiate a lower offer, direct you towards a professional home inspector and provide you with the many resources you will need for the process.
Fixer uppers can be a challenge, but a fun one. When done correctly, they can offer higher returns on the property value and be a fun hobby for those interested in investing the time and money.