Buying A Fixer-Upper
My wife and bought a fixer-upper. We sold our house last summer and have been renting since. With the Charlotte real estate market as hot as it is we decided to look for something that needed some work. We didn’t want to pay the premium price for a house that was turnkey. We ended up finding a great deal on house that was for sale by owner. I can usually get a good feel for good or bad bones in a house after walking through. The house was originally built in 1935. Old, but you could tell that it was well maintained and aged well.
First Things First
First things to evaluate are the most expensive features of the house. The foundation, HVAC, roof, and electrical. Are there signs of any water leaks? Do the floors feel level or is there a lot of sag? Cracks in the foundation? Ask the owner the approximate age of appliances, central air, and roof. What kind of wiring does the house have? Rewiring a house can end up costing over 10,000 dollars! All of these components should factor in to your decision to buy a fixer-upper.
The Crawl Space Can Be A Make Or Break
The crawl space and foundation is one of the most important parts of a house. There are tons of expensive issues that can be found in crawl spaces. Don’t let a high moisture reading scare you away too quickly. I’ve had clients immediately walk away from deals due to high moisture levels in a crawl space. This issue can be fixed! As long as there isn’t major damage from long periods of high moisture. Check the insulation, usually insulation will start turning black if there has been moisture issues. This can also lead to rotting floor joists, sills, and girders. If there is wood rot, it COULD end up being expensive to fix.
Look For Improvements That Can Add Value
After everything checks out and there are no major issues that you can detect, look for improvements that can be made. Improvements that will add VALUE. This is where you have to be creative, but also be aware of what you can and can’t do when it comes to renovations. You want to make the cheapest changes that add the most value. The house my wife and I bought had a wall separating the kitchen and living room. I knew if we could knock this wall out and open up the kitchen and living room it would completely change the house.
Always Expect The Unexpected
As it turned out the wall we wanted to knock out had a chimney inside of it. Not a deal breaker yet! I had never heard of knocking a chimney out of a house. So I made a bunch of calls and ended up finding the perfect crew to knock the chimney out. Ended up only paying $2,500 to have it done. After watching them knock it out, I couldn’t have been happier with the work and the price it cost. Especially with an older house, you never know what your going to find when you start tearing things down.
Get The Most Bang For Your Buck
Educate yourself on current real estate design trends. Kitchens and bathrooms are the areas where your going to get most of your investment back. Opening up a wall to provide more of an open concept. Find ways to bring more natural light into your fixer-upper. Pinterest is a great platform for learning popular trends and ideas. Here you can learn easy DIY projects you can do yourself.
Know What You Can And Can’t Do
For a Realtor, I’m a pretty handy guy. I love projects and making improvements to homes. But, I know I have limits. You have to be realistic with yourself. People think they can look up a video on YouTube and instantly think they are a general contractor. This can be dangerous. Especially when you are tackling a project that may degrade the structural integrity of the house. The projects you are unsure whether or not you can do. Call contractors and get multiple quotes. Ask all of them how they would do the work. Hearing how they would do it might Ask as many questions you can. This will help you learn!
Don’t Get Carried Away!
Once renovations start you will probably have a thousand different ideas running through your head. You have to be sure the renovations you are doing are going to pay off when you sell. Always be conscious of resale value. You should be well aware of what houses are selling for per square foot in the area before you even buy a fixer-upper to begin with. If you buy a house for $140,000 and you know upgraded houses are selling for $160,000 within the area. Its not a good idea to invest $20,000 in renovations because you will lose money when you go to sell.
Some people want to buy a fixer-upper, flip it, then sell once renovations are done. Some want to buy a house and fix it up over a couple year period. If your looking to flip a house you need to be aware of capital gains taxes. There are ways around paying taxes on your profit like doing a 1031 exchange. Also, are you going to list your newly renovated house with a Realtor. If so, add on 6 percent of the sales price and another $1,000 for attorney closing fees. Statistics say, listing a home with a good realtor will bring you 13% more money than listing it For Sale By Owner. Even with the 6 percent commission you will still end up netting more money with a lot less work.
Flip or Flop
Fixer-uppers can be great investments or can end up being money pits. That’s why its so important to educate yourself as much as possible before diving into a big investment. Learn from mistakes you make. Know your limits on actual work you can do versus hiring a professional. Run the numbers ahead of time. Prepare yourself to devote time, sweat and money, and hopefully in the end you will end up on the positive side.