Buying a house is an intimidating experience, under any circumstance, for first-time buyers. Taking on a fixer-upper project adds another layer of uncertainty and stress to the home-buying process. It’s a leap of faith assuming that a distressed property will prove to be a good investment with a lot of hard work, money, skill and determination.
Look carefully in your area for promising fixer upper projects. As you do, think about how much time and effort you are willing to put into such a venture. Take careful note of whether the renovations will be mostly cosmetic or structural. Will all that work and money provide you with a good return on investment? For example, consider the average listing price for a fixer-upper home in Jersey City, New Jersey, is $599,000. Fixer-uppers can be a great option in a slow housing market, but only if you have the patience and ability to see it through.
What kind of modifications?
Are you looking for a place that needs new awnings, fresh paint and new kitchen cabinet doors? Or, are you willing to dig deeper and get a contractor involved if it’s necessary to repair a foundation or replace a roof? Remember, a house inspection can help give you an accurate picture of the work you have in store for you. Major structural repairs don’t necessarily mean you should back away.
There are government home loans designed to help homebuyers who want to rehab a fixer-upper, such as an FHA 203(k) or a Fannie Mae HomeStyle Mortgage, which help you pay the cost of a contractor. These loan options let you buy a home with a reserve fund that is held in escrow to fund your renovations. They’re probably your best option if you’re taking on a real challenge. Whatever you decide to do, be certain to choose a neighborhood that puts you in a good position in terms of resale. A realtor with experience locating fixer-uppers should be able to help steer you in the right direction.
Where to begin?
As long as there are no structural problems, consider beginning with upgrades that will most make you feel comfortable and at home. Starting off with fresh paint can be a good way to begin transforming your new investment, as can putting in new carpeting or new window treatments. You’ll probably face more intense changes later on after you’ve had some time to think them through, but making a few cosmetic improvements is a good way to put your mark on the place and begin bringing your vision to life. Another good first step could be to put in a cozy breakfast nook, with a small table and chairs next to a window looking out over the back yard.
Renovating the kitchen or bathroom will obviously be more cash intensive and depending on the extent of the work, can strain resources. If money gets tight, switch gears for a while and spend time focusing on low-impact and inexpensive projects such as taking down old wallpaper or putting in a new shower door. You’re still making progress, but doing so with smart, simple and measured improvements. Having the right tools is important when renovating a fixer-upper, so make sure those drills, jigsaws, power sanders, hammers and other hand tools are up to the job.
If the value of your renovated fixer-upper exceeds median market values in your area, it may be worthwhile putting it back on the market if you can earn a healthy profit. Consult with a real estate agent to determine the best course of action.
Buying a fixer-upper requires a major commitment of time, money and effort. It’s essential to examine a property carefully and assess your ability to do what needs doing before jumping into it. Remember that finding the right mortgage, one that’s well-suited for a fixer-upper, is also important.