When is it a Good Idea to Purchase a Fixer Upper Home?
Considering a fixer upper?
Seriously though, before you channel your inner Chip and Joanna Gaines, there is a lot to consider when deciding if a fixer upper is the right type of home purchase for you and your family. After all, remodeling a home is a HUGE undertaking and one that shouldn’t be considered lightly. It is most definitely more difficult than the HGTV shows make it look, especially if you yourself don’t possess the skills and experience or cash flow to fund such an expedition. All that being said however, it can be wildly rewarding in both experience and what you stand to gain from it all. I’ve remodeled two homes and I’m still married so it is possible. ;-) Let’s explore…
To begin, fixer-upper prices aren’t as reliant on the temperature of the local real estate market so that in itself can present more opportunity. When looking for this type of property remember that you are seeking a house that everybody will want in the future but no one wants right now. You have to have a bit of an eye to be able to look past the physical blemishes and imagine the diamond in the rough. And remember, if you make a purchase offer for a fixer upper at the right price, you will start making money the day you close.
There are three key elements to consider when looking for a fixer upper- location, layout and condition. For location, consider the environment and look for things that some consider undesirable like busy streets or schools, etc. Are the houses in the neighborhood well cared for? Is the area up and coming? All of these things will affect the value of a home now and in the future. For layout, think about flow. Does it flow or can that be altered easily to give it flow? Does it have more than one bathroom?- this in particular is preferred by most buyers. How many bedrooms does it have compared to how many bedrooms can or should it have? And for condition, definitely do the appropriate home inspections and appraisals because cosmetic fixes versus fundamental fixes carry a vast difference in cost.
What I look for in a fixer uppers:
Homes where removing a single wall might create a dynamic floor plan.
Basements with egress windows that can be turned into apartments and bedrooms.
Homes painted in unappealing colors inside or out.
Run down homes in great neighborhoods.
There are a range to fixer uppers available, from cosmetic fixers (my favorite) to rebuilding from the studs. Everyday there are homes available in the MLS listing service that are available to ‘purchase as is’. This is oftentimes a good clue that they wouldn’t pass a home inspection for being safe and sound for livability and will be cash only transactions. Deciding which time of fixer you can actually handle is the first step.
A realistic view of what you can afford is important and there are so many options available and things to consider such as “sweat equity” and rehab loans. A renovation or rehab loan can be the answer to many problems as it lets you finance a house and improvements at the same time. I’m often asked about financing a fixer and the first thing I will do is connect you with a mortgage broker who specializes in rehab loans. You’ll need to have a number of things lined up from the estimated amount to borrow based on estimates from your contractor. Considering your “sweat equity” can also be immensely helpful. If you have the skills and time to do the actual “fixing” in this situation, a sweat equity provision that can eliminate the need for a cash down payment. Sweat equity allows buyers to “earn” their entire down payment by improving a home before purchase. There are options out there for every situation.
What I love about cosmetic fixers is that you can find some real diamonds under a lot of dust, kitchen grease, carpet and unstated homes. It’s all about the bones of the home and if you’ve got a solid foundation, good roof, plumbing and electricity and if you have the time and desire, you can put your energy into making it uniquely yours. But remember, buying a fixer is stressful and not for everyone or every relationship. They can be frustrating, expensive and soul destroying at times, so do a full consideration of your resources, personality and relationship before you strike out on this path of glory. And if you choose it, know you will be greatly rewarded in the end.
FINALLY, Consider this- “Forget money. Remodeling is the number one cause of divorce.” -Anonymous
View Portland Metro Fixer Uppers
ABOUT FRANCISCO SALGADO
A home remodeler at heart, Portland real estate broker Francisco Salgado takes great satisfaction in helping you fulfill all your real estate need with competence and care. Whether it’s a move in ready or demolition ready Francisco can help you find it. Give him a call so he can help you dig where you live, 503-951-8548.