If you’ve got your eye on a home that needs work, how do you tell if it will be worth the investment. Aside from calculating the expected costs of necessary renovations, you also have to consider your time investment in the property to decide if it’s worth it. If the right things are wrong with a house, you could not only turn it into your dream home, but also earn equity in the process. Not all “fixers” are alike and it takes careful consideration to find a fixer-upper that’s right for you. Take these three steps to ensure you get a fixer-upper that isn't a flop.
Assess the price
If you are looking at buying a fixer upper, the home needs to be priced as such. You need to make sure you are buying a home with enough liquid cash to make all the updates and repairs it needs. Make sure to find out what homes in the same neighborhood are selling for with similar amenities and materials. A COListings realtor can help you with that information as well as how much money you can invest before you over-improve. Your total budget should be based on the market value of other homes in the neighborhood.
Evaluate the improvements
Buying a fixer-upper should give you the opportunity for instant equity. This means that with some sweat equity, simple projects can bring an instant return if you sold right away. High-value and low-effort projects like landscaping, painting or small updates in the home can have an instant positive return on the investment.
Next, are the big projects that may require a hired professional. According to the National Association Of REALTORS®’ “Remodeling Impact Report” (RIR), these four larger projects are instant equity-builders.
A new roof- While this may not seem like the best use of money for a fixer-upper, a new roof can actually pay you. REALTORS® reported you can recover 105% of the cost to replace it.
Insulation- New insulation packs a one two punch. One, it has almost a 100% return and two, it keeps paying with energy savings. This update is one to consider especially if you plan to live in the home.
Updated Floors- Whether you refinish hardwood floors or completely redo them, at $2,500 or $5,500, both updates will provide instant equity if or when you sell.
New Siding- Many might see damaged siding as a project they might not want to take on, but it can be priceless. On average you can recover around $10,000 of the cost to update when you sell.
So why didn’t a kitchen remodel make the top four list? A kitchen remodel does rank highest on the projects that will likely value a home for resale. But, with a cost of $20,000-$30,000, only 67% is actually recovered. If the fixer-upper is discounted enough, this might be a project you would want to take on. Not to mention the desire for an updated kitchen may be worth the cost to you and your family.
Gauge your ability
Taking on a fixer upper is physically and emotionally demanding. It isn’t going to be a simple weekend DIY project like you may be used to doing. It could take several months until the home starts to look like the fixer-upper you imagined it would be. If you are up for the challenge budget wise and time wise, you might just have end up with a home that that’s worth more than you paid and it comes with bragging rights.
If you are in the market for a fixer-upper, contact a COListings agent who can show you some properties with real potential.
NATIONAL ASSOCIATION OF REALTORS®’ “Remodeling Impact Report: http://www.nari.org/assets/1/6/2015-Remodeling-Impact-Report.pdf