A brand new home can be challenging when you’re on a tight budget. The rising cost of homes is why buying fixer-upper homes instead of turnkey homes are becoming very popular. While many popular TV shows make changing the look of a house attractive and fun, there are many aspects to consider before embarking on the journey.
In this article, we’ll discuss the advantages and disadvantages of fixing upper houses to help determine whether you should invest in one. In addition, we’ll guide you through finding fixer-upper properties so you can begin exploring the available options.
What Is A Fixer Upper House?
A fixer-upper house is a house that needs regular maintenance and repairs. Because the costs of renovations and repairs are the buyer’s responsibility, these homes are offered at less than turnkey houses.
A fixer-upper home is ideal for someone who wants to acquire more homes for the budget or investors looking to renovate and flip houses to make money. Most buyers will stay in their fixer-upper homes and make incremental improvements to the property.
Pros Of A Fixer Upper House
The main benefit of fixing a home is that it costs less than turnkey houses. Even though you’ll have to remodel it, you’ll be able to benefit from an affordable list price and down payment requirements.
Because fixer-upper homes also need repairs and renovations, they tend to make it difficult for competitors to compete. With most home buyers competing for turnkey homes, you’ll have a better chance of securing a bargain at the best price.
A few buyers prefer fixer-upper houses because they like personalizing their homes according to their preferences. Television shows focusing on remodeling have demonstrated to viewers how rewarding it can be to transform an older, worn-out house into a glistening jewel.
In the course of your remodeling, you’re the boss. This means you can manage every aspect of the renovation, including the budget, the contractors you choose to work with, and the colors and materials utilized.
Cons Of A Fixer Upper House
Before fixing your home, there are a few drawbacks to be aware of. The first is that renovations can be costly and dangerous. Ideally, fixer-upper houses can be sold for profit. This implies that the fair market values of the home are higher than the cost of buying and renovating the property. However, any unexpected issues, delays, and errors could increase the price.
Matt Carter from Inc and Go says, “generally, you lose money from one of these properties the longer you keep it because keeping it for longer means that you have to work on it for longer and juggle carrying costs (e.g., utilities, etc.). Being an experienced fixer-upper investor makes it better and then sells quickly”.
It takes time to come up with an accurate estimation of the costs of repairing the home. When you inspect the property, you’ll discover issues you still need to plan for. To account for unexpected costs and errors, it is recommended to overestimate the cost of your renovations.
You’ll need to prepare to be in a construction area. The renovation process can sometimes last several months or years and be quite a hassle.
How To Find Fixer Upper Homes
If you’ve concluded that the benefits of fixer-upper homes are more significant than the drawbacks, you could be thinking about how to locate one.
We have special tips specifically for real estate investors looking for ways to locate their fixer-upper properties.
- Drive For Dollars
- Search the MLS
- Auctions
- Real Estate Investor Website
- Bank & Lender Websites
- Tax Records
- Real Estate Agents
Drive For Dollars
“Driving for money” is real estate investor jargon that refers to driving around in your car looking for houses in the neighborhood you want to be in. This is a traditional but tried and tested method. Drive through the neighborhood’s streets and search for fewer new houses.
The most obvious signs are neglected yards, boarded windows, peeling paint, and newspapers that need to be collected. When you come across a property that appears to be damaged, take note of the address so that you can identify and reach the owner.
Search The MLS
The fixer-upper houses can be found through Multiple Listing Services or MLS. The access is only granted to those with an actual real estate license. If you do not have one, you may collaborate with an agent for real estate or a broker.
Look for short sales and real estate-owned (REO) properties for a list of fixer-upper houses. Additionally, search for listings that have been on the market for more than 90 days. All of these indicate homes that may be distressed or are being sold by motivated sellers. If you need to familiarize yourself with REO or short sales properties, go through our guide on this page here and this one.
Auctions
Auctions for real estate can be a fantastic option to find a bargain on a foreclosure property so long as you stay clear of being involved in a bidding battle. You can locate an auction on the local paper and county websites. Then, you can take part in auctions for properties that you prefer by taking part in auctions in person or online.
Real Estate Investor Websites
If you do not have access to the MLS, A great alternative is to use our My State MLS websites for real estate. These websites provide public real estate listings, including listings for off-market properties. Examples include short sales, foreclosure banks owned, foreclosure auctions, and bank owned. Certain websites are free, while others require a subscription to access the site.
Bank & Lender Websites
There are also fixer-upper properties that go directly to banks or mortgage lending websites. If a property is foreclosed on, the lender is given the right to claim ownership to recuperate some of the cost. Thus, they are enticed to offer these properties for a fair price.
It is common to find an area dedicated to bank-owned or estate-owned homes on their website. You can browse for listings and then submit an offer.
Tax Records
If you’re ready to roll on your sleeves and perform some investigation, tax records are a fantastic source of information to locate houses that need repairs to buy. You can get public tax information by searching the local government’s website. Find the address of your assessor’s office, and then use the search tools to browse their records database.
If a homeowner is having trouble with their finances and paying taxes, It’s a sign they’re probably in financial trouble. It could also indicate that they’re in the process of maintaining their property and are at risk of having their home foreclosed. This is a chance to present an offer directly to the homeowner before the property is returned to the mortgage lender.
Real Estate Agents
Real estate agents must be aware of the most lucrative deals in their area, So why not team with an agent? Professional agents can leverage their networks of clients, wholesalers, lenders, and clients to create a list of fixer-upper properties to sell. They may also have insight into homes yet to come on the market. Remember that they can access MLS. The cost of an agent could be worth it if they can help you find an excellent bargain on a fixer-upper.
How To Buy A Fixer Upper Home Fixer-upper homes that are bought for repair can be broken down into six steps that can be taken to take action:
- Conduct an Inspection: Before purchasing a fixer-upper, conduct a thorough inspection of the home. This must always be noticed when it comes to fixer-upper homes because an inspection can reveal the repairs required. It’s also an essential element in estimating the cost.
- Estimate your expenses: In addition to the cost of any repairs that are discovered during your inspections, make sure to consider your costs of making cosmetic changes as well as the cost of labor, materials, and other supplies. You’ll be able to get a better estimate by looking around and asking for estimates from nearby contractors.
- Get any required permits: You may also require permits from the city you live in for specific projects. Building rooms, structural work, and constructing fences are all instances of projects that usually require permits. Visit the municipal government’s office to learn about the rules.
- Choose DIY projects to complete: Many rehabbers save money by working on all the projects they can on their own. This is especially true when they’re handy or have helpful family members and friends. Consider the tasks you could do on your own, even if it’s like painting, and then factor in the savings in your budget projections.
- Secure a loan If you’re sure that you’ve found an affordable fixer-upper worthy of investment and are ready to look into the financing options. There are two options: the Federal Housing Administration (FHA) 203(k) and the Fannie Mae Renovation Mortgage are excellent government-backed loans that can aid in purchasing an older house that requires repair and help fund improvements.
- Send your offer And last but not least, make sure to submit your offer. The reason to buy an undervalued property is to make a good bargain for it and not to overpay. It is possible to present to the seller your results from the home inspection as well as cost estimates to justify the price you make. If the seller doesn’t agree during negotiations, it might be best to walk away. In the best-case scenario, the seller will likely accept a fair deal with certain contingencies to protect you if something unexpected happens.
Are Fixer Upper Houses A Good Investment?
Fixer-upper homes can be great investments if executed right. If all goes according to plan, the resale value of a fixer-upper will surpass the purchase price and the expense of renovating the home.
But, delays, errors, and surprises can make more expensive renovations to the house. For investors, you must be aware of the due diligence you exercise and make sure that your fixer-upper investment is worthwhile. Make sure to skim over the crucial analysis of your deal. We provide how to do it within the Deal Analysis 101 guide. Some key strategies include looking at similar properties in the neighborhood and getting accurate estimates from reputable contractors in your neighborhood.
A fixer-upper home is an excellent investment if you are sure you’ll make a profit.
Which Fixer Upper Homes Should You Buy?
Many investors would like to be able to identify the ideal fixer-upper: one that has cosmetic improvements and no unexpected costs. There isn’t such a superpower in the market. Instead, you must apply several methods to discover the perfect fixer-uppers for your portfolio.
The best place to begin is by looking at your budget. What is the ideal purchase price? How much do you have left to make improvements? With these numbers in mind, you can evaluate the possibilities for improvements in the properties you’re considering. If you find a property that requires costly repairs like foundation repairs, a new roof, or a brand new HVAC, check your budget and ensure that you have the funds to achieve the best return on investment. The ideal property for purchase could have one significant alteration (or absence of any) and will likely require cosmetic improvements.
Apart from possible modifications, you’ll consider buying repairer-uppers priced correctly. Considering the cost of purchase as well as comparable houses in the neighborhood which will inform you what you could profit from the deal. These figures are crucial when you are evaluating various fixer-uppers.
Summary
Fixer-upper homes are a great way to earn money if everything goes as planned. You’ll have purchased a house at a bargain and customized it to suit your preferences. This is a cost-effective method for homeowners to acquire a bigger house for their money and create their own. For investors fixing up houses are ideal for turning profits.
If you choose this route, it’s recommended to know how to locate fixer-upper homes. This way, you’ll be able to find the best opportunities and take the opportunity when you’re prepared. Make sure to conduct a thorough investigation; diligence is required to protect yourself from the risk. Assuming everything goes according to plan and the home is in good condition, repairing it could be an excellent method to increase the value of a house, even on a tight budget.
