Can You Afford the Renovations?
When considering the purchase of a fixer-upper home, it’s important to evaluate how much time and money you will have to spend on renovations. It’s often the case that houses needing a lot of renovation work are available at rock bottom prices. However, this can mean excessive costs when it’s time for renovations. Here are a few things to consider before taking the leap.
How much work can you do?
Determine how much of the work you are willing and able to do. If you’re a master at hanging drywall and your significant other has a knack for plumbing, it’s very possible to save big. This could be the difference between an inexpensive property that needs a great deal of work but is ultimately within your budget after renovations, and one that is not.
Keep in mind when deciding which work you’ll do yourself that safety is key. Anything that you don’t truly know how to do, especially things like electrical work, plumbing, or jobs involving power equipment, should be left to a professional.
Consider how much time you realistically have. If you work, take care of your family, or otherwise have engagements that occupy most of the day, don’t take on huge DIY renovations.
Choose contractors wisely
Before closing on your fixer-upper, speak with a few contractors to get an estimate of the work you plan on handing off to a professional. Without knowing how much you’ll need to spend to make the house look the way you want, you can’t know what the real cost of ownership will be. Once you have quotes from several contractors, work with your real estate agent to come up with an offer that considers how much you’ll be spending to get your new home in top shape. Your agent might suggest putting a clause in the contract to have some of the worst problems repaired by the current owners before the closing.
Before settling on a specific contractor, talk to friends, family, and neighbors to get a sense of the quality of work you can expect from each candidate. Reviews go a long way when choosing the best company for specific needs.
Hire a home inspector
In most situations that involve a mortgage or other loan from a bank, you will be required to have the house inspected before the loan is approved. Even if this isn’t the case, hiring a qualified home inspector that is proficient in their field. For example, an electrician for the electrical, plumber for plumbing, and so on. This is a critical aspect of ensuring you know what you’re getting yourself into with a fixer-upper. For instance, you might be able to tell that the floors in the kitchen will need to be replaced, but only a skilled professional can say for certain whether the foundation is solid or if asbestos is in the attic.
When it comes to real estate, knowledge is power. Take any information provided by the contractor and consult your REALTOR about how to proceed. They might recommend working part of the cost into negotiations.
And most importantly, Add a cushion
After you’ve decided which portion of the fixer upper’s remodeling you’ll be able to complete, consulted several contractors, and had the home inspected, you may be anxious to close. However, there’s another critical step to ensure you’ll be able to afford the renovations.
Unforeseen circumstances almost always arise during the process of remodeling. It is essential to account for these when determining what you can afford. A general rule of thumb is to add between five and 10 percent to the anticipated costs, just in case your contractor discovers pipes that need to be moved or if the price of the materials you choose increases. By adding a cushion to your financial projections, you should be in a great position to realistically determine whether a fixer-upper home will truly be worthwhile.
