It is not at all uncommon for non-investors to consider purchasing a home that is priced low but needs some work. Though low prices may certainly be appealing, choosing the wrong home could have an extremely negative impact on your finances. Learning how to make the best choice is the key to limiting risks when purchasing a fixer upper.
The best type would be a home that only needs minor cosmetic fixes and small repairs. Competition for these types of homes can be stiff. Though it may be hard to successfully purchase a home that needs little work, you may be able to cash in on homes that need just a bit more repair, yet are viewed as undesirable choices to many.
The exact opposite of the home that needs only minor repairs will be one that is in need of major work, such as structural changes. Properties that are in need of substantial work are best left to others who have the funds to easily pay for work to be done. Homes that violate heath codes should also be passed on. The only exception would be if you are a contractor yourself, or know one that will perform the work for you at a major discount.
Properties in need of major repairs should be avoided for the following reasons:
- Loan approval may be impossible - Banks may deny a loan application until a number of repairs have been completed. If you cannot afford to make the necessary repairs, the loan application could be rejected
- Total costs - It is important to know what each repair will cost, and use this information to determine whether or not you can afford the total bill. Even small fixes will cost money. Be sure that you have enough money to cover all costs prior to agreeing to purchase a fixer upper
- Disruption of your life - Working with contractors can be stressful at times. Overseeing the work they are doing, or making repairs on your own can take up a lot of your time. Chaos can result, and this can certainly affect your quality of life for a period of time
So what is the best choice? Typically, the best choice will be a home that needs a moderate amount of repairs. This may consist of some tasks that you can do yourself and others that will require the help of a professional. Do take the time to sort out what is a minor repair and what is a major one. For example, a fresh coat of interior paint is minor. Replacement of the foundation is major.
Once you have chosen the home, so check with the building department in your area to find out what restrictions or codes are in place in regard to making changes within the home. Gather several estimates for each job that will need to be completed by a contractor. Finally, do not consider making additions or changes that are not absolutely necessary until the needed repairs have been completed and paid for.
Should you decide to purchase a fixer upper with the help of a partner, be sure to discuss funding, plans, and schedules in advance. Having someone that will share in the responsibility can be helpful. However, it can also put a strain on a relationship should precise planning not be taken care of in advance.
