Buying a fixer-upper can be a great investment, but before taking on this type of project you have to be realistic about what can be accomplished on your budget. A venture like this can be a great experience or a baptism by fire.
Before moving forward with a purchase of this type, you should educate yourself about the process and learn the mistakes others have made and avoid them – mitigate your risk. So before you go calling your agent to find the next cosmetically challenged home, nail down the facts:
Create a cost sheet and figure out what kind of project you can afford. Some questions to ask yourself include:
- What is my budget?
- Will I need mortgage financing?
- What types of renovation or construction loans are available?
- How will the timeline impact the budget?
When creating your cost sheet be sure to take into account potential project delays and cost run over. Both can consume a large portion of the construction budget, leaving you with an empty bank account and an unfinished home.
There are a few mortgage programs available for renovations or rebuilds; talk with your seasoned real estate professional about a referral for a mortgage professional well-versed in renovation or construction mortgage loans.
Type of Project
Decide what kind of project you are capable of managing. Are you interested in investing in some simple cosmetic changes like fresh paint, new light fixtures, refinishing wood floors or do you want to take on a big project and are more interested in gutting the entire house and replacing everything?
Be realistic when answering these questions. Construction and renovation projects take time and money – if you’re not properly prepared more money than you anticipated can be spent.
The location of your new home is key to getting the most from your investment. If you’re looking in a neighborhood with an over-abundance of condominiums on the market that translates into a lot of competition.
If, however, you by a single family that might change the odds. Have your real estate professional research the town’s sales, foreclosures rates, crime statistics etc. – this is important to know, you’ll be investing your money in that town.
Construction and renovation projects can be risky so make sure you surround yourself with knowledgeable, trustworthy advisors who can guide you through the process.
Learn more about construction and renovation mortgages with 203K Loans or the HomeStyle Renovation Loan.
This article has some great tips for buying a fixer upper, but with the right help you can purchase a diamond in the rough and turn it into a real gem. And the best part with these homes is you can have instant equity in a home to build for the future. If you have any questions regarding these types of homes, please e-mail, at firstname.lastname@example.org, text or call me at 630-234-8240. So don't let a little work keep you from getting the home of your dreams.
Posted by: Dianne Yelm
Century 21 Affiliated
November 9, 2014