Considering a Fixer-Upper? Think About These Things First
A property that requires renovations is known as a fixer-upper. For many owners, this purchase has several advantages. In some cases, this type of property can offer an excellent investment opportunity. However, buying a fixer-upper can have a few disadvantages as well. There are instances when renovations can cost more money than the property is actually worth. For that reason, before making an offer on the property, it is important to get the property inspected by an experienced home inspector.
The inspector can evaluate the area, the condition of the property, and the extent of the renovations. More importantly, the inspector can identify renovations that are simply minor cosmetic repairs vs. renovations that require major structural improvements. Potential owners should consider the amount of time required to complete renovations. A precise timetable is useful for determining whether property prices and current mortgage rates are likely to increase or decrease during renovations.
Owners that are considering buying a fixer-upper should identify all structural renovations. In most cases, major repairs such as electrical and plumbing are expensive. These types of renovations do not increase the value of the property. Moreover, strengthening the foundation and repairing the roof will not raise the value of the property either. These improvements are a major disadvantage of purchasing a fixer-upper; however, they are required to sell or live in the property.
When a fixer-upper is in a quality area and does not require major structural renovations; renovating the property and reselling it is a considerably profitable option. For many potential owners, it may be beneficial to weigh the pros and cons of buying a fixer-upper.
Advantages of Buying a Fixer-Upper
Reduced Buyer Competition
A fixer-upper is a property that requires renovations and most buyers are not interested in performing extensive improvements. Reduced competition for the property is an advantage that some buyers find appealing. In most cases, decreased competition for the property can reduce the final price the buyer pays.
Personalize The Property
Another advantage of buying a fixer-upper is the buyer can fully customize the property. Many buyers believe placing a personal stamp on the property can make it a home. Do-it-yourself repairs that include cosmetic renovations offer a level of satisfaction. These are inexpensive repairs that are visible when reselling the property. Minor DIY renovations that owners find enjoyable are replacing fixtures, paint jobs, stripping wallpaper, placing tiles or carpet, putting in ceiling fans, and replacing windows or barndoor hardware. These types of renovations can increase the value of the home and add style.
Disadvantages of Buying a Fixer-Upper
Going Over Budget
The biggest disadvantage of purchasing a fixer-upper is going over budget. Although loud renovations can create sound issues and living complications; going over budget, is the most common issue associated with buying a fixer-upper. In some instances, an inspector may identify one issue that leads to another. The inspector may even inform owners that one repair cannot be completed until other improvements are completed. For example, foundation issues may not be completed until all plumbing and electrical issues are resolved. It is important to add that a home warranty can protect owners from high costs associated with failures of major systems.
Decreased Return on Investment
Another disadvantage of buying a fixer-upper is the improvements do not return 100 percent of the cost when the owner sells the property. In the event the property requires specific improvements, the owner should attempt to offset costs with valuable cosmetic enhancements. Cosmetic renovations offer the most effective opportunity to receive a return on investment.
Frustration and Inconvenience
Whether owners are completing the repairs or hiring professionals, there is a lot of time supervising and ensuring the work does not go over budget. This is a frustrating and trying process. Owners must guarantee that issues are corrected inexpensively and completed in a timely manner. This is a common disadvantage associated with purchasing a fixer-upper.
When considering purchasing this type of property, potential owners need to weigh the pros and cons. Owners must ensure that the property is worth the price. More importantly, owners must ensure renovations do not cost more than the property itself.