As demand for homes continues to grow, more people are buying fixer-uppers. In Bank of America Research’s annual millennial home improvement survey, 82 percent of millennials said they are more likely to consider buying a fixer-upper today, mainly driven by the lower purchase costs. However, committing to purchasing a fixer-upper can sometimes be challenging, particularly if you are renovating as a first-time homeowner. Yet, there are many reasons to consider a fixer-upper for your next home. The key to making it a success is planning ahead, timing it right, and employing a few simple go-to tips to avoid the money pit mistake.
Have A Plan Going Into The Purchase
Before you do make an offer on a fixer-upper, take time to consider the pros and cons of owning one. While they can come at below-market prices, fixer-uppers can also cost a significant amount of money and time to bring up to the desired condition. Ask yourself: are you and your budget ready for the long-term commitment of major renovations? Individual renovation costs like hiring a roofing contractor and a new roof can cost around $8,000.
Be Realistic About Your Financing Options
While fixer-uppers can work out cheaper to buy, they can also cost a pretty penny to remodel. So in addition to having your mortgage financing figured out, you also need to think about financing your renovation costs. The good news is there are several options including the use of a home purchase loan. Some lenders even allow you to combine a renovation loan with your mortgage. Before buying your fixer-upper, spend some time getting familiar with the different options out there and what could be right for you.
Be Clear On Your Renovation Budget
According to estimates from The Porch, only 52 percent of renovations finish within budget while 5 percent finished under budget. So it is always wise to leave ample room in your budget for renovations when buying a fixer-upper. They can also come with surprises so you don’t want to find yourself spending your entire home buying budget on the purchase price and unable to afford needed repairs.
Another tip: increase your home maintenance budget to account for owning a fixer-upper. Most experts recommend putting aside 2 to 5 percent for home maintenance costs annually. However, older or fixer-upper homes can sometimes cost a bit more to keep going until you can get the renovations going. For instance, a fixer-upper with older heating systems can cost more to source replacement parts.
Finally, remember to be patient if you do go ahead with buying a fixer-upper. The process of turning one into a home is certainly not an overnight one- and does not need to be rushed. Focus on renovating things in order of importance and slowly, it will begin to look and feel like the home you dreamt of.