TV shows like Fixer Upper and Property Brothers have made fixing up a home look relatively easy to do, renewing interest in these sort of properties throughout the years. Of course, fixing up property has its own advantages and disadvantages that you’d want to consider before taking on the project. But you’ll really want to focus on two things: do you have the time and the money.
Ultimately purchasing a fixer upper boils down to how much time you have to invest in the property and how much money. The payoff could be worth it in the end, but only if you’re willing to make the investment. Fixing up a property can also be emotionally taxing if you’re not prepared.
But before you decide if it’s worth the time, you should find out if it’s worth the money.
Calculate If It’s Worth It
In the beginning a fixer upper can look like a worthwhile investment, but if you do the simple calculations you’ll see if it’s really worth it. Start with the likely market value of the house after renovations will be made. Then, sum up the cost to renovate the home adding an additional 25 percent to these costs for unforeseen problems that are likely to arise as you’re renovating.
Now, subtract the renovation costs from the estimated market value of the house after the renovations are made. To ensure you’ve made an accurate estimate use real estate prices for properties like yours in the area.
After you’ve subtracted the cost of renovation fron the estimated market value you’ll be left with how much you should offer. Many property professionals also suggest deducting 10 percent from your offer to make your investment worthwhile.
Determine How You’ll Fund The Project
Before you make an offer, you should already know if you’ll be able to fund the project and if you cant fund it with savings will you be able to get a loan. Some options for funding renovations include a renovation loan, like Fannie Mae’s HomeStyle Loan. This loan is rolled into your mortgage, which makes things easier. Another popular option is an FHA 203(k) loan. This loan is easier to qualify for than the Fannie Mae HomeStyle Loan and it only requires 3.5% down payment.
Now that you’ve thought about the cost involved, are you really willing to invest the time?
Decide If You Want To Invest The Time
Besides the money you’ll spend, you’ll also spend quite a bit of time. Even if you plan on using professionals for some of the projects, there’ll be projects you’ll need to take on yourself to remain in your budget. Do you have enough time to complete these projects? Do you have the skills to complete these projects? Do you have a specific deadline you’ll need to meet? If you don’t have much time to invest in the project a fixer upper is not your best option, even if it is a great investment.