If you’re thinking of buying your first home, it’s an exciting time. You’ve probably scoured real estate sites looking at available properties. If desirable homes are out of your budget, you may consider buying a fixer-upper. Although these homes will need work, their purchase prices are usually significantly lower than homes in good repair.
Are You Looking to Buy a Fixer-Upper?
One of the first steps in buying a home should be preapproval for a mortgage. That way, you’ll know how much a lender will let you borrow to purchase it. Keep in mind, though, that you’ll also have to pay for renovations if you buy a fixer-upper.
A home inspection is vital if you’re looking at a distressed home. This tells you everything the inspector finds that needs to be repaired, although it’s common for hidden problems to arise during renovations.
Before you sign a contract, you’ll need to list the repairs you will make and get quotes from contractors or other professionals to determine how much they will cost. Be sure that the total rehab budget is reasonable. If the cost of the home plus necessary repairs equals more than similar houses appraise for in the area, you might want to pass on that property.
Like with any home purchase, you’ll want your fixer-upper to:
Which Renovations Should Be First?
Financial advisors recommend that you pay for renovations in cash as you go, if possible. For buyers who get renovation mortgages, you’ll have a certain amount of money set aside in escrow for your repairs. Regardless, there are some projects you should prioritize.
Structural issues are a definite priority, but major home systems are usually next. You’ll need a sound roof and an efficient HVAC system. Contact Amp One Heating & Cooling to inspect your home’s HVAC system and make necessary upgrades.
When deciding which project to tackle next, it’s good to prioritize those that improve your home’s value. You can research features that many buyers look for:
Can You DIY?
You may be handy with a paintbrush and a screwdriver, but there are some things you’ll probably need to hire a professional to do:
While it can save money to make repairs yourself, some require licensed professionals so the home will pass inspections. In addition, if you’re not capable of producing professional results, it’s better for a home’s resale value to hire someone else.
Will You Live in It?
People buy fixer-uppers for several reasons. Some enjoy reshaping the home they’ll live in, some plan to flip it, and others plan to turn it into a vacation or residential rental property. The home’s location, your family’s needs, and the overall housing market are factors to consider.
If you decide to keep the house but plan to rent it out, you’ll be a business owner. Be sure to register that business with your local and state governments and get an EIN (a tax identification number) so you can take advantage of tax deductions.
Are You Ready?
Buying a fixer-upper can have many benefits. Select the property carefully, choose and make repairs in a smart sequence, and hire professionals when needed.