Image: LHOON
In today’s housing market, even the most dingy and dank properties can start to look attractive. When you consider the difficulty of getting a decent mortgage these days, the cheaper a house is, the better things start to look.
A fixer-upper property can be a real cash cow, if you choose the right one. But choose the wrong one and you could end up putting your heart and soul into an unsalvageable slum. Check out our handy list of things to consider before you sign on the line!
1. Be Ready to Hunt
Many fixer-upper bargains are hidden in neighbourhoods you wouldn’t normally go to, don’t attract the eye particularly, or are not very well advertised. You may have to hunt for them with some determination, but they can be very worthwhile once you find what you are looking for.
2. Look Out for Neglected Homes
Properties that look as though nobody has lived in them for some time can be fantastic finds. Often, the owner lives elsewhere, and can’t be bothered to either do up the place or put much effort into selling it (as this would probably require doing it up). So, if you come along offering a quick and easy sale, the owner is likely to give you a good price.
3. Beauty is Only Skin-deep
The most important thing to think about with a fixer-upper property is whether the fixing you need to do is cosmetic or structural. Simple things like fixing gutters and fences or splashing some paint around can be done relatively easily. If, however, you will need to replace walls, rip out the electrics and plumbing and start again, or upgrade the foundations, think again. These are costly renovations that probably won’t boost the value of the property, meaning that you will pay through the nose for little financial gain in the end.
4. The Right Neighbourhood
A fixer-upper can be a fantastic way of getting into a good neighbourhood without paying the prices that normally come with it. If your fixer-upper is in an area where there are good schools, low crime rates or easy access to the town or city centre, you could have yourself a bargain. If it’s in a run-down part of town which is unlikely to pick up in the near future, there isn’t much hope; there is no point living in your dream home if it’s plonked in the middle of The Street from Hell.
5. The Future of the Market
You may have had a tip-off that a particular area is about to rocket in price. This can be caused by all sorts of things; new building development in the area, or local authority sponsored regeneration, can really boost an area’s reputation. So, you could be ahead of the game, nipping in before the rush and buying a cheap property that you can do up and sell once the demand increases. Make sure you do your research on this though, and test out your hunch on people you know in the area.
6. Potential Flooding
A house might have fantastic potential, but one of the major hidden problems that strikes home-buyers is flooding. Find out from people in the area what drainage is like there, and whether there has ever been serious flooding in the vicinity before. You may want to go with a property that is at risk from flooding anyway, but check out how much this will cost you to insure against and add this into your home-buying equations.
7. Trains and Planes
Properties that sit directly in flight paths or back onto train lines never do quite as well in the market as those that do not. You might not notice the planes or trains whizzing by when you view the property, but some estate agents have been known to only bring potential buyers to view a property when they know there will be no interruptions, having checked out the timetables first. Again, this is something you have to check out with people in the neighbourhood.
8. Watch Out for the Joneses
Some fixer-upper properties are very cheap because they are significantly different from others on the street in terms of structure. For example, your fixer-upper might only have two bedrooms, whereas Mr and Mrs Smug next door have three. So, though you can redecorate all you like, you will never be able to bring the value of your house into line with others in the area without making major structural changes. Often, this costs as much as the value you add to the property, and so isn’t really worth it.
9. Adding Bathrooms
If you were paying attention, dear cash-crazed reader, you would know that adding rooms to a house often brings zero profit. This rule, however, has an exception; bathrooms. Having one lovely bathroom is a good selling point for a house, as bathroom renovation is a hassle. Having two bathrooms sends homebuyers into a frenzy of enthusiasm. So, if you are thinking of tacking on a bathroom, this is the one structural change that can actually be worth double what it costs you. If you’re prepared to lay out that money initially, go for it!
10. Dig out Your DIY Dungarees
Fixer-uppers provide the greatest return when you do a sizeable proportion of the work yourself. Have this in mind when you view the property, and be realistic about your own DIY skills. Are you sure you are capable of all the work that needs doing? If you’re not, you might want to reconsider; using builders, painters and decorators can end up costing you a fortune in the long run, meaning that you lose rather than gain from your house.
11. Be Prepared to Curb the Cowboys
If you do end up employing contractors to do the fixing up of your fixer-upper, keep a close eye on them. In the real estate world, horror stories of botch jobs and builders who deal in cash and never turn up abound. So, make sure you bring in someone who has been recommended to you personally, and don’t go with the cheapest contractor you can find, especially if you’ve never heard of them. Keep checking on the work that is going on to ensure that they don’t overrun on time or money.
12. Look Around You
You may go to view a fixer-upper and be immediately put off by its dingy condition. An important thing to remember, however, is that you can change things like hideous wallpaper and scruffy floors. Step through the messy house and look out of the windows. Can you see a fantastic view out there? Will the positioning of the property mean that, with a little TLC, the place will be filled with sunlight? Once they are properly utilised, the aspect of and views from a house are the things house hunters pay for, so look out for them.
13. Be Money-wise
Some people figure out how much a fixer-upper could make them in the long run, but then forget to consider where exactly they will get the money from to start with. The down-payment on the property normally wipes out a considerable chunk of cash. With this in mind, make sure you have planned out where you are going to borrow the money for renovations from. A credit card with a low APR or a special 0% interest rate on purchases for a limited period can be a good option if it’s just cosmetic renovation to pay for. Otherwise, there are many loans you can take out specifically for home renovation.
14. Get Real
Fixing up a property can be exciting, especially when you have your sights set on that big pot of money at the end of the project. It’s easy to get carried away by that, so take a reality check. These projects can take months or even years to complete, and there will inevitably be setbacks and mishaps along the way. Don’t go in to home renovation without patience and an unsinkable optimism.
15. Time to Buy
Despite the cons that can come with a fixer-upper, there are plenty of pros too. We have already covered the profit you can make. There is also never a bad time to buy a fixer-upper. Fixer-uppers tend not to be aligned with the general market conditions, with their prices remaining relatively stable. This means that if you do buy, you can do it safe in the knowledge that if you had waited a little longer, it wouldn’t have been any cheaper.
16. Less Competition
Far fewer people want to buy fixer-uppers than houses that are good to go. That, of course, is why you are attempting to buy one; in order to make a profit from people too busy/lazy/inexperienced to renovate a house themselves. This means that if an estate agent puffs out their cheeks, looks concerned and says “well, I’ve had two other customers look around this property today,” you know they are probably bluffing.
17. Satisfaction
This is just a small point, but if you are having doubts about whether or not you can be bothered to put all that time and effort into a fixer-upper, step back for a moment and think about the end result. Imagine the sense of satisfaction you will have once the project is completed and the profit is made! Basking in that satisfaction (and of course, all that profit) could make it all worthwhile.
18. Future Living Costs
You may be able to afford the fixer-upper. You may be able to make a profit once you want to move on and sell it. If you think you have done all the maths, however, double check your sums. There might be differences in the cost of living where you do now and where your fixer-upper is that would make the move unrealistic. Differences like this can include things like local taxes and rates, which might be significantly higher, or the cost of travelling to and from work if you’re moving further away. Bear this in mind and factor it into your calculations before you buy.
19. Check for Little Visitors
Pests can be a real… well, pest. The area your fixer-upper is in may have a pest problem, and this is definitely worth finding out about. After all, you don’t want to see all your hard work slowly destroyed by beetles, termites or ants. The best thing to do is to ask for a pest inspection if possible, and make your offer reliant on approving this inspection, with repairs paid for by the seller if at all possible.
20. Don’t Just Think About Profit
Every now and again it’s OK to make it all about you: even though you’re concerned whether your fixer-upper will tick all the boxes and appeal to Mr and Mrs Average, stop for a minute and think about how it appeals to you. You may have to live in the house for as long as it takes to fix it up, or you may be looking to fix it up for yourself, rather than for resale. If there is something about the house that does not fit with your tastes, and that will drive you slowly insane, reconsider.
