Many homebuyers think buying a fixer-upper is a great investment. It can save you a lot of money, and give you a real sense of accomplishment when you finish all of the repairs. But how do you know if a particular fixer-upper is worth the effort? Choosing a home that requires massive repairs could end up costing you more overall than a home that is ready to move into. The key is identifying some specific factors.
Repairs: Structural vs Cosmetic
They type of repairs a home needs is the most important factor in determining if a fixer-upper is worth the effort. Cosmetic repairs typically cost much less, and are generally easier to fix. Structural repairs, on the other hand, are more costly and time consuming. Some common structural repairs that can be costly include:
- Replacing heating and air systems
- Foundation repair
- Major plumbing and electrical work
- Replacing concrete
- Adding new rooms
- Complete remodels
Location, Location, Location!
Location is one of the most important factors in real estate, especially with a fixer-upper. Even if you completely overhaul the home, if it’s in a bad neighborhood or an inconvenient location, all the repairs in the world won’t make the home more desirable to future buyers. However, a neglected house in a good location can be well worth the effort, assuming the repairs are within reason. Locations to consider buying a fixer-upper in include areas with good school districts, convenient access to businesses and restaurants, and areas with low crime rates.
Cost of the Repairs
An easy way to determine if a fixer-upper is worth the effort is to calculate if the repairs will cost more than they will add to the resale value of the house. Take the estimated cost of the repairs, including materials and labor, add 5 percent for unforeseen problems, and subtract this amount from the estimated market value of the home after the repairs are made. This leaves you with an appropriate offer to make on the home. If the seller thinks this amount is too high, then the fixer-upper may not be worth it.
Final Verdict: Get an Expert’s Opinion
While this information is a good primer for those considering buying a fixer-upper, it’s still advised to consult with an expert before signing your name to anything. A qualified realtor like myself can help you through the process, and help you find a fixer-upper that will be worth the effort.