Bret Engle's Tips and More
Freshly painted, newly carpeted, move-in ready homes are perfect for some — but how many people really love all renovations in a new house? An updated home doesn’t necessarily match a buyer’s tastes, as you’ll likely pay a premium on something you’ll change anyway.
However, if a seller has made updates to prep a house for market, he’ll cut costs to maximize profit, which means not splurging on the highest-quality materials. If you’ve got definite design ideas, are willing to add sweat equity, and don’t mind living in a state of partial chaos for weeks or months, consider buying a fixer-upper instead.
Pros and Cons of Fixer-Uppers
Fixer-uppers are often priced below market value. If you purchase and can improve it, you’ll reap the benefits of that extra equity. Plus, the more you do yourself, with good old sweat equity, the greater the value of your return. You’ll have less competition and more creative control over everything in your new home.
However, a major discount might indicate serious big-ticket issues with the roof, foundation, plumbing, or electric systems — each of which chomps through money you’d rather spend on more cosmetic updates.
Prepare yourself: renovation gets expensive when you’re looking at a complete kitchen or bathroom overhaul. Those fees include labor, materials, architect, engineering, inspections, permits, and licensing costs, and they can add up quickly.
Even the best-prepared, most honest contractors encounter unexpected issues that can increase budget costs by 10 to 25 percent, and if you’re financing with an FHA 203(k) loan, jumping through hoops can cause major cashflow delays.
Buying and Financing
To calculate the home you can afford, determine your annual income, what you can afford as a down payment, your monthly expenses, the current average mortgage APR, and the type of loans for which you qualify.
Several loans work for buying and financing the work on a fixer-upper: Fannie Mae HomeStyle, FHA 203(k), Home equity/HELOC loans, and cash-out refinancing. You’ll want to research each loan carefully to determine which works best for you.
Repair and Design Projects to Tackle First
Many experts recommend living in your home for at least a few months before starting major projects. What you initially earmarked as a must-do project might, in fact, fall further down the list as you get to know your home’s quirks.
Whether your new home requires serious structural work or just needs a lot of cosmetic work to make it yours, start by choosing one room that doesn’t require too much and turn it into your sanctuary. You’ll have an oasis in your home from which you can plan all your other projects. These ideas should help you prioritize.
Assess the condition of your home so you can itemize the must-do-now versus it-can-wait projects. Think about your time and energy levels — can you dedicate most nights and weekends to different projects, or is it time to hire an expert? Consider your budget, too, which may become the main driver of the projects you tackle.
Easy DIY projects that don’t break the bank include painting, changing cabinet hardware, and installing new lighting and plumbing fixtures. Update kitchen cabinets with paint or new doors. Refresh the bathrooms with different shower curtains, towels, and rugs, and reface the tub or switch out the vanity.
To Stay or to Sell?
Right now, it’s definitely a seller’s market in most parts of the country; however, if you’ve only just invested a lot of cash and sweat into fixing up your new home, is selling really a good idea? According to Dave Ramsey, you should consider whether:
● You’ve got equity in your home.
● Your bank account has three to six months of savings and you’re out of non-mortgage debt.
● You need and can afford a home that better accommodates your lifestyle.
● You can pay for your move with cash.
● You’re ready — emotionally — to sell.
● You understand the market and have a realtor you trust.
There’s a huge difference between rehab and cosmetic updates. If a home’s got good bones and you have the know-how to turn ugly into awesome, a DIY fixer-upper offers a rewarding adventure with a great pay-off by the end.
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