There’s usually an element of risk in purchasing any new property. Things are a bit different when it comes to buying a fixer-upper, a house that needs a lot of work to make it the kind of home you’ve always wanted. Most fixer-uppers are a gamble. You could end up with a dreaded money pit or a profitable investment that your own blood and sweat, not to mention money, transforms into a dream come true. The buying process is somewhat different for a house that needs a lot of renovating and requires the assistance of a professional with a background in this type of real estate venture.
Do your research and line up some area realtors who have a background working with renovation properties. Take your time settling on the one you like and trust the most. Meet with prospective agents in an informal setting such as a neighborhood coffee shop or over breakfast. Come armed with questions, and don’t be afraid to pick their brains. Be sure to find one who understands finding and purchasing a fixer-upper, preferably one who knows a contractor who can help identify how much work you’ll be looking at when you find properties you really like. You want as much expertise at your disposal as possible during this process.
Finding Lenders and Properties
Identify several lenders who offer special loans. Fannie Mae and Freddie Mac offer rehab loans for renovation properties and those that have been through foreclosure. If you’re a veteran with at least 181 days of active duty, you can qualify for a VA loan. Benefits can include no down downpayment and lower interest rates. As you look at fixer-upper properties in your area, bear in mind what’s nearby (don’t buy next to a factory or a school), what kinds of renovations you’re comfortable doing, and assess each one based on that criteria and also on the ROI you can expect. You’ll want an agent who can give you a good idea of what your new home will be worth once you’ve completed your rehab work. Be careful to focus only on homes that make sense in terms of your budget, personal capabilities, and expected profit. Once you’ve settled on your ideal project, ask a contractor to give it a look before you sign on the dotted line. It’s always good to get a professional’s take when making such a huge commitment.
If you’re able to get an inspection before purchasing, you’ll want an inspector to certify that the place isn’t on the verge of coming down and that its key features are sound. Pay close attention to the roof, the presence of pests, and the sewer lines. Once you’ve gotten the thumbs up, line up projects based on what you can do, what you’re willing to do, and what might be better-suited for a contractor who has the proper experience. If you’ve settled on a house that needs a new roof, foundation work, or new HVAC system, you’ll probably need to line up contractors.
Be prepared to spend a lot of time with your tools. Make sure you have good ones, including drills, electric sanders, jigsaws, and more. You’ll also need crowbars, hammers and mallets. There will be headaches along the way as you work to make a rehab project the home of your dreams. There will be many do-it-yourself projects you can get started on right away, such as stripping wallpaper, painting, laying your choice of flooring, putting in light fixtures, repairing or replacing baseboards and molding. There may also be broken windows and doors to replace and leaky flooring to repair.
Be honest about your ability to handle renovation projects, and get the opinion of a professional if you’re planning to jump into structural repairs yourself. You may have to invest in quite a few new tools (some can be leased) to take on many of the DIY projects you have in mind. Be ready and willing to hand off to a professional who’s better equipped and more experienced for some of the more important renovations.