Q: What should I consider when choosing to purchase a home that needs a considerable amount of repairs?
A: Fixer-upper homes are some of the hottest deals for sale in our local real estate market today. Their affordable prices and the many choices available make them highly favored among real property investors and owner-occupied home buyers alike. Fixer-uppers are homes that can be purchased usually well below market value due to distressed circumstances attached to the property and their need for significant repairs. Once fixer-uppers are purchased, the new owner either takes the time to make the necessary repairs himself or hire a handyman or contractor to make all the required repairs to make it a great place to live. The purchaser will choose to resell the fixer-upper for a profit, hold onto it as a rental, or live in it personally, enjoying the finished product he carefully and artfully has created.
Locating fixer-uppers are not as hard to find as one might think. Realtors know what properties would meet the criteria and should be consulted when searching for fixer uppers. Knowing the current real estate market is important when purchasing any property. Location is a key aspect to successful real estate investing. You should buy houses in the best areas to maximize your benefits and profitability. This is where you, as an investor or a regular home buyer, can find amazing deals.
Fixer-uppers, or “handyman specials,” are typically sold “as-is,” which means that the original seller does not have any desire to make any necessary repairs on the property prior to selling it. With this understanding, the seller knows that their selling price would be far below what the typical market price would be for the property if it was all rehabbed. While this can look very attractive to a buyer, this dynamic could be risky for a typical home buyer.
There might be huge hidden expenses, such as poor structural work in the walls, cracked or deteriorating foundations, roof replacement or plumbing system issues. However, at the same time, there can be a great opportunity for an experienced investor who knows what to look for. Hiring a specialized home inspector to check out the property is important. You need to know the real condition of the property. A good home inspector should be able to help you determine if the needed repairs are more than your budget will allow.
Fixer uppers can provide great savings in terms of their value pricing. In addition, it offers buyers an opportunity to renovate according to personal style and requirements. For those who have the skills and knowledge to do so, renovating the home provides a wonderful satisfaction at completion. And there is less buyer competition in this segment of the market since not everyone is interested in buying them.
If you are considering rehabilitating this type of property, then you should also consider how to finance the cost of the necessary repairs. Either you have the available cash to do the renovation or you have arranged adequate financing with a lender. There are types of FHA loans that can allow the purchase of a property and include the costs of renovations and repairs. They are referred to as 203K loans.
While there may be certain risks when buying any home, including fixer-uppers, the advantages can be very significant. If you are a person who wants to save a lot of money, have your hand involved in making your next home personalized to your liking and needs, buying a fixer upper may be the perfect next home to buy. There is great potential for profit in fixer uppers.
Get answers to questions you might have about real estate from Randy Durham, who is president of the Chattanooga Association of Realtors and a broker with Keller Williams Realty. His column appears on Sundays. Send your questions to Business Editor John Vass Jr. at jvass@timesfreepress.com