Thinking about buying a fixer-upper? Buying a property in need of renovation and turning it into a suitable personal residence can be extremely satisfying.
But tackling a fixer-upper can also be challenging. For starters, when inventories are tight, it can be difficult to purchase a fixer-upper at a significantly lower price than the market value of a comparable move-in ready home. That can mean very little wiggle room in the renovations budget, which doesn’t leave a cushion if the unexpected occurs. With an older home in need of repairs, the chance of running into unanticipated costs is high.
Here are some considerations if you are thinking seriously about opting for a fixer-upper when purchasing your next home:
1. Budget adequately for materials. Materials were never cheap, but the pandemic has created a huge demand for home renovations. In addition, it has made manufacture and logistics more challenging, resulting in a shortage in producing and delivering some supplies. Together, the lack of supply and increased demand have combined to cause a perfect storm of higher prices—a tripling of costs in some cases.
What that means is that the renovations budget you may have been able to stay within just a year ago will need to be significantly higher now.
2. Be prepared to wait. And wait. Because of the afore-mentioned demand for home renovations, all of the general contractors, tradesmen, skilled construction labor and other workers you might normally depend on for major renovations are often booked months out. That means you may need to have an extensive “plan b” for where to live during a renovation period that could last for quite some time.
3. The unexpected is expected. No matter the age of a home—including new construction—there is always the risk of issues popping up, whether due to safety or environmental or structural integrity issues. But for older homes, particularly those that have not been well-maintained over the years, the threat of unforeseen issues popping up is much greater—and often, so is the cost to mitigate them.
4. Stay realistic. While it’s true that there are certain things you may be able to do yourself, be careful not to overestimate your skill set. Know when it’s time to bring in the professionals. You could end up spending more money to resolve problems you caused by attempting to do a renovation you couldn’t finish. Even if you happen to have the skills, consider whether you have the time and energy to devote to the project, from start to finish.
So, is a fixer-upper the right way to go? That depends on what risks you are willing, and able, to take both financially and personally. If you think you’re going to buy a fixer-upper to save a lot of money, you could end up disappointed. If you are decide to go the route of an older home that needs major repairs and renovations, enter into the situation with eyes wide open.
Arm yourself with knowledge, both surrounding the home’s current and potential value as well as the costs to bring it up to move-in ready standards.
Today’s reality TV shows make purchasing and renovating a fixer-upper seem like a walk in the park. If you’ve never gone through a major renovation and have no experience renovating an older home, consider whether today’s market environment is the best timing to get a start. Another word of caution? Be aware of the value of comparable homes in the neighborhood.
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