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Buying a Fixer-Upper: Is It Worth It? How to Tell
A fixer-upper isn't necessarily something to eschew. If the right things are wrong with a house, you could not only turn it into your dream home, but also earn serious equity (wealth building!) in the process.
Here's how to tell if that fixer-upper is a keeper - or if you should keep walking.
1. Evaluate the Price
If it's a fixer-upper, it should come at a fixer-upper price. Duh, but that's a reminder NOT to fall in love too quickly with a home that the listing says "just needs a little TLC." Do your homework first, and if the price is right, then fall in love. Find out what similar homes in the neighborhood sell for and how tricked out they are (with amenities and materials). And that will tell you how much money you can invest in the home before you over-improve for the neighborhood, a mistake you want to avoid if you plan to sell in the future.
2. Start Evaluating What Improvements Are Needed
The best fixer-uppers offer lots of opportunities for "instant equity," which means if you sold the home tomorrow you'd pretty much get that money back, unlike other projects which you may never get your money back on.
Some can be as simple as painting or landscaping, which you can accomplish with sweat equity. Other tasks, like the kitchen, may require the work of professionals and cash to pay them. It's those projects you want to carefully evaluate against the home's price.
3. Which Hire-a-Pro Projects Add Instant Equity?
Based on data gleaned from the NATIONAL ASSOCIATION OF REALTORS®' "Remodeling Impact Report" (RIR), if these four projects are on your fixer-upper's list of must-haves, then you may have found your dream equity-builder:
-New roof
-Hardwood floors
-Insulation
-New siding
4. Evaluate Your Ability to Deal with Disruption
Whether you're a DIY Jedi or content to let the pros handle the remodel, if your patience is shorter than your potential home's to-do list, a fixer-upper may not be a good choice. Renovating a bathroom alone can take two to three weeks. Add hardwood flooring, a new kitchen, and siding, and you're looking at a whole summer's worth of rehab.
When considering a fixer-upper, evaluate the limits of your emotional energy as well. Inevitable project pitfalls and delays can be wearing. Only if you have the time, patience, and emotional endurance for a fixer-upper will it be a good fit for you. And only you can determine that.
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