If you have found yourself in a position to purchase a home in the next 6 months or a year or planning ahead for the next few years, you might be asking yourself some important questions.How much
4 Questions First Time Homebuyers Should Ask Before Buying A Fixer Upper
Dated: October 17 2018
4 Questions First-Time Homebuyers Should Ask Before Buying a Fixer-Upper
A fixer-upper seems like an unbelievable bargain, especially for first-time homebuyers. In certain markets, fixer-uppers can save you tens of thousands off the price of a home before renovations. But, fixer-uppers aren't for everyone. Here are some questions to ask yourself before jumping into this big investment.
1. Is a Fixer-Upper Right for Me?
Renovating your fixer-upper may take longer than you expect, so you should be ready to live in an unfinished home for a while. Remember, your house may feel more like a construction site than a home for the first few weeks or months. You may even have to live somewhere else until your house is livable. If you want to move into a finished home as soon as possible, a fixer-upper may not be best the best choice.
Second, you have to be ready to put a lot of work into repairs. Take into account your fitness, energy levels and how much free time you have. Do you have the skills required to remodel the kitchen? Are you willing to learn about flooring? At the very least, you’ll have to do some painting. If you’re keen on hiring a professional to do all of your cosmetic fixes, you may save money purchasing a home that’s move-in ready.
2. What is Best Type of Fixer-Upper for First-Timers?
If this is your first home, avoid houses with structural issues such as problems with the foundation or plumbing. Fixing these problems is expensive and hardly increase the value of your home. On the other hand, cosmetic fixes are those that make the house appear more attractive. These fixes include painting, landscaping, replacing flooring and updating the kitchen or bathroom. These are the most profitable improvements, and you’ll likely make your money back for them when you sell.
3. Can I Afford the Home?
Even though fixer-uppers are significantly cheaper than move-in ready homes, they still require a large investment. Before making the purchase, estimate your home’s affordability based on factors such as your annual income and average monthly spending. Add how much you’ll pay for renovations to the price of the home and make sure the total is at or below market value. Remember that after the down payment on the home, you’ll still need a sufficient income to pay for your monthly mortgage or rehab loan. Learn about the different types of loans you can get on your home from Fearless Homebuyer. Finally, be sure to look up the current average APR to get an idea of how much you'll need to pay each month towards your loan.
Livability recommends adding up the cost of two mortgage payments, two months of rent and your renovation budget plus an extra 10 percent. This is the maximum price you should pay for a fixer-upper. If you’re looking at the house as more of an investment rather than a home to live in, make sure you can make a significant profit on it when you sell. Estimate the resale value of your home after your repairs are done. You may have to hold onto the house for a while and rent it out while you look for buyers.
5. Where Do I Start with Repairs?
If you want to move into your home as soon as possible, start by painting and replacing flooring. This is much easier to do before you move in all of your furniture. Then, make a list of all the repairs that need to be done and plan out your ideal order. You may want to finish your bedroom first, so you have a comfortable place to retreat to from the unfinished chaos. If you plan to sell your home, tackle projects that give you the biggest return on your investment. For example, kitchen and bathroom remodels are great ways to increase your home’s value. Also, consider upgrading features of your home to reduce your energy and water consumption.
Buying a home for the first time is a huge milestone in every person’s life. Though fixer-uppers are a great way to enter the housing market if you’re on a budget, they are not for everybody. Make sure you have the time, finances and the proper planning to turn a dilapidated house into a wonderful home and a profitable investment.
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