Be prepared
People often underestimate how difficult it is to truly renovate a property. Only those people who’ve never bought a fixer-upper and successfully improved it think that it’s an easy process. Before you even consider buying a fixer-upper, you’ll want to mentally prepare yourself. Assume that the renovations will cost twice as much as you think, take double the amount of time you initially thought, will be less pleasing to the eye than you had imagined, and that the house itself won’t be worth nearly as much as you had hoped. Even though all of these things are unlikely to occur, if you assume they will, you’ll be pleasantly surprised when they don’t.
Current Value vs. Potential Value
It is important to understand how your renovations will impact the value of the home you wish to buy. If all of your work will result in a home that’s worth exactly as much as it was before, you might want to consider another property. In order to adequately assess these values, enlist the aid of a qualified real estate agent. An agent experienced in properties that require extensive renovations should be able to give you a general idea of how much the value will improve.
It’s also a good idea to hire a home inspector to evaluate the cost of the renovations. The inspector should provide you with a report indicating the work that needs to be done as well as what the estimated costs might be. Make sure you add ten to fifteen percent to account for any unforeseen expenses. If you feel you need a more accurate estimate, hire a contractor to tally the costs for you.
Add the renovation costs to the price of the house and compare the final cost with the estimated value after renovation. If the final value of the renovated property is actually less that the cost to purchase and renovate the house, consider investing in a different property.
Fixes That Pay
Some renovations bring more value to a home than others. Fixing kitchens and bathrooms will increase the value of your home exponentially. Adding new floors, especially hardwood, and fixing any damaged drywall are also cheap fixes that increase value. Paint may be cheap, but it doesn’t really add to the value of the home. Beware of any structural fixes such as piping and foundations as these are money-eaters that don’t add as much value as you might expect.
Know Your Own Limitations
Not everyone can do everything. Know exactly which renovations you can do yourself and which one you’ll need to hire a professional to complete. You might be tempted to do all the renovations yourself to save some money, but if you don’t know how, or if it’s something that requires a specific skill that you simply don’t possess, hire someone. It might cost a little more, but it might actually be cheaper in the long run. Some projects, if not completed properly, will actual lessen the value of your home, so think twice before tackling a project that you’re not qualified to take on in the first place.
Research Your Area
Most jurisdictions require homeowners to purchase permits prior to starting any real renovation. While you probably don’t need permits to install hardwood flooring or change the light fixture in the bathroom (though you’ll want to check this out carefully, as some areas require permits for every little change), at some point you’ll encounter a project that needs permits. This is especially important if you intend to do electrical, plumbing, or structural improvements.
These permits will inevitably cost money and should be included in your calculations. You should also be prepared to be patient. The issuing of permits is done by the government, and local governments often take their time.
Expect your renovations to take a great deal of time, money, and labor. There will be inevitable bumps along the way, and the occasional surprise. However, with a little preparation and an honest look at your own expectations, you might find that the old house that’s falling apart really is the perfect home for you.
