Have you ever sat down on a Saturday morning, grabbed a cup of coffee, and spent hours watching HGTV? If you’re anything like me it’s a weekly ritual. In fact the shows that I tend to watch the most are the ones where some poor soul purchases a house that needs a lot of work and they spend a ton of time and money trying to get the home fixed up. In fact, it’s these types of shows that convinced me to get into real estate years ago.
One day after watching one of those house flipping shows I convinced myself that if those people could fix up a house and make money off of it then so could I. So off I went a couple of days later with the intent to find myself a fixer-upper that I could make some money on. I was completely clueless at the time, I had no real experience running the numbers to make sure that the house I bought would actually make money after I sold it. I went in completely blind. All I knew was that I had experience working on houses and that if I paid less for the house and all the repairs than what I could sell it for after it was fixed up then I’d surely make money.
As they say ignorance is bliss. I found my first fixer-upper, spent 4 months working on it, put it on the market and somehow made a decent profit. In hindsight I got really lucky. I really had no idea what I was doing. I was lucky that the house sold for way more than I paid for it. I wasn’t so lucky on the next one. I thought that since I made such a nice profit from the first house then it was going to be easy to always make money on these rehabs. Couldn’t have been more wrong. The next house I paid too much for, and spent 50% more on repairs than I had planned, and in the end I lost about $9,000 on it. Reality was that I really had no idea what I was doing. I didn’t understand the numbers and the risk involved. Lesson learned though, and since then I’ve made sure that every home that I’ve purchased, the numbers were going to work in my favor.
When I work with clients in Kansas City I always like to share some of my experiences when we are looking at fixer-uppers. Especially if they have no experience estimating costs, or even going through the process of a home rehab. It’s really easy to look at a home, see that you can get it for much less than other homes in the area, and think that you’ll be able to get it fixed up without paying more than the home is worth. Unfortunately, that’s not always the case.
What questions should you ask when you are looking at fixer-uppers?
Where are you going to live while the house is being fixed up?
Are you going have to sell your current residence before you close on your new home? Are you willing to live in a construction zone? All of these questions need to be addressed before you even think about looking for a home that’s in need of repair. Living in a home under construction is about as awesome as it sounds. You have dust all over everything, tools and building materials are scattered throughout the house. Literally everything you do will in some way be impacted by the construction zone you chose to call your home.
If living this way doesn’t sound like a bad thing to you, then maybe buying a fixer-upper would be a good idea.
Who will be doing the work?
How much construction experience do you have? Are you going to try the ultimate DIY project and do all the work yourself? Do you really have the skills and time to tackle a project of this size?
Rehabbing a home is a huge undertaking. Yes you can break it down and fix up the house a room at a time, but you’re still doing a ton of work. Some people love doing this stuff, they enjoy getting their hands dirty and spending hours of time learning a new skill. Yet for others, remodeling isn’t really their thing, they’d be better off hiring professionals that can get the job done quickly and correctly.
How much will it cost?
You can get a great deal on houses that need a lot of work, but you have to be careful because that work can often times cost you more than the house is worth. Knowing your numbers is probably the most important thing when it comes to buying a fixer-upper. You have to know how much it’s going to cost to get the home fixed up the way you want it. You need to know if some things can wait and be repaired later when you get more money. Having a plan and knowing your numbers will help ease a lot of the stress.
Should you do it?
Making the decision to buy a home that is going to need a lot of work can be a very exciting experience. Looking at the house and deciding what features you want to add and trying to picture in your head what the home will look like when it’s completed can be a lot of fun. When making the decision try to take your time and weigh the pros and cons. If you decide that buying a fixer-upper is right for you, you’ll be prepared for the adventure that lay ahead.
If you’re interested in looking at fixer upper homes contact me.