What is fixer Upper, Handyman Special, TLC(Tender Loving Caare) Home
A fixer-upper home is a home that requires some repairs. Fixer-upper homes are also callled "Handyman Specials." The type of work needed may be cosmetic or deep and it is up to the buyer to assess the estimated repair costs to see if purchasing the fixer-upper home will be a good investment.
You need a clear assessment of what is needed and what it will cost. Don't forget to add in the cost of labor — both your own time and that of contractors.
How to Buy and Sell a Fixer-Upper
It just needs a little TLC(Tender Loving Care, Renovation), right? If you're willing to put some elbow grease into it, buying and selling a fixer-upper can be a profitable endeavor. If you're up for the challenge, it can be a rewarding experience.
Decide on the geographic area in which you want a property. Whether you intend to live in a home or not will impact where you'll want to buy. Remember that your ideal place to live may not be the best place to invest in property.
Keep an eye out for properties that need only cosmetic improvements. Houses that could use new paint, carpeting or flooring are the least expensive and offer the fastest potential turnaround. Larger problems such as bad roofs or faulty foundations are often prohibitively expensive and undermine eventual profit, depending on what you got the house for and how much you think you can sell it for.
Watch for vacant homes that have not been kept up by the owner. These forgotten houses can often have the most motivated seller you could hope to find.
If you find an appealing property with seemingly reasonable repair needs, confirm. Have the home professionally inspected. Specify that the final sale is contingent on a satisfactory complete inspection.
Get a formal appraisal ($200 to $400) of the home's value and have your agent work up comparables. If possible, have the appraiser estimate how much the home should sell for after it is restored to good condition.
Get several bids from contractors of how much it will cost to fix what needs to be fixed (see How to Hire a Contractor, Plumber, Painter or Electrician). Be sure to check zoning requirements and include permit fees. The house's value should increase at least $2 for every dollar you spend on improvements. Calculate the potential value of the house after renovations and be sure that it isn't higher than comparable houses on the block. Be realistic about repair costs.
See How to Shop for a Mortgage, and pursue a mortgage that includes funds for home renovation.
Make whatever repairs and renovations are necessary and then sell the property.
Tips & Warnings
Be patient. Unlike the folks on Home and Garden Television's "Weekend Warriors" who make it sound as though renovations happen within a few weekends, fixer-uppers can take a long time to find and much longer to spruce up, particularly if you're holding down a day job..Timing is often more important than the state of the house. If you sell during a hot market, price appreciation can help offset the cost of your improvements..Don't be taken aback by properties that have been on the market for a long time. It's not unusual for some fixer-uppers to be up for sale for a year or more, depending on market conditions..As a general rule of thumb, improvements that are invisible to the average home buyer or merely bring the home in line with expected minimum standards don't add to the resale value. If you make the wrong improvements, such as enlarging a closet or converting two bedrooms into a master suite when you only had two bedrooms to begin with, you won't see much, if any, return on your investment. Another potential pitfall is over-improving the home compared to other homes in the neighborhood..Conditions that your home inspector finds that can warrant backing out of a deal include pest infestation, radon, significant water damage to the structure, or other major fixes. Be aware that naturally occurring threats, such as mud slides or floods, if you're located in a flood plain, may be equally dangerous. Properties should be investigated by a structural engineer as well..It's a conflict of interest if your home inspector also offers to do the work he or she has stated needs to be done.
How to Invest in a Fixer Upper House
Picking the right home to purchase can be a chore. Choosing a home that needs to be remodeled, better known as fixer upper houses, requires a person with vision, time, patience and money. Investing in a fixer upper can provide equity and personal satisfaction if performed correctly.
Things You'll Need:
•Real Estate Agent
•Good Discount Home Building Supplier
Contact a Real Estate agent to help find property ideal for investment. Ask your agent about power of sale, fixer upper, handyman special, distressed sale, foreclosures or short sale properties. Many of these properties are offered at much lower prices and are in need of work. They can save you money but can require commitment to bring the property up to living standards.
After finding the ideal property, have a home inspection performed. even if the property is being sold As-Is, you still need to know what to expect before the deal is closed. You may find that the property may need more work than you are willing or can afford to do. By having a home inspection, you are also able to get a head start finding the right contractors and materials for your fixer upper.
After acquiring the property, complete a timeline of what work will be done, in what order and for what length of time. Set realistic time goals especially if you will be living in the home and need to move quickly. Give time for unexpected repairs.
Interview several contractors for the job. Get bids from each on their services, materials and labor. Be very clear about your expectations and the quality of work expected. The idea of purchasing a fixer upper home is to save money and also have equity. Choosing the wrong contractor can ruin that goal.
Shop around to several discount home improvement stores and suppliers for the materials you need. If you can save money by supplying the contractors with materials, by all means do so.
Be patient and take your time with your fixer upper house. If the home will serve as a primary residence, make the major repairs and updates as they are affordable. If completing the entire job all at once is possible, then move forward. However, if there are jobs that can wait, do so.
Once the repair and or updates are completed have your fixer upper house appraised again. Assess what was done correctly and what should be changed in the future. Remember, a home is an on-going investment.
How to inspect a fixer upper home and determine if it's a good investment.
So you found the diamond in the rough...a fixer upper. But is it really a good investment? There are many aspects to take into consideration when buying a fixer upper like inspecting the home for major and costly problem areas that could eat into your profits.
I recommend focusing on value added improvements which will add at least $2 of value for every $1 you invest.
Circle the perimiter of the house for cracks in the foundation. A damaged foundation overtime can cause a house to shift and settle. Foundations are extremely expensive to replace and add little or no value to the price of a home. If the house has a basement, you will want to inspect the basement for cracks in the walls which can be an indication of a damaged foundation. Also, there is the obvious slants in the home which are a give away that something is not right. Because slants in the home can be fixed easier and with less expense than replacing a foundation, it is more important to inspect the foundation for cracks rather than worring about a slight slant in the home. Replacing a foundation on a 1,000 sq foot home can run up to 20K
Next, turn on all the faucets in the house...and I mean all the faucets. What you are testing for here is water pressure. In older homes one problem can be that if the shower is on, the water pressure in another room such as the sink may be compromised. This point is expecially important if you are considering investing in a multi family home...the last thing you want is one tenant complaining about the low water pressure in their shower whenever another tenant turns on the washing machine in their unit. Ideally, you want to look for cooper plumbing. Most fixer upper homes will have galvanized plumbing which is ok so long as the water pressure is good througout the house. Galvanized plubmig tends to corrode easily thereby reducing water pressure.
Next, you will want to inspect your electrical situation. Take your screw driver and unscrew the electical panel. You are looking for rust and fried wires. Rust could indicate that water has gotten into the panel..wich is bad news and fried, burnt out wires are not a good sign. You also want to look at the size of your panel box. Does it have room for additional breakers (those black switch things on the panel)? Often, older homes have small electric panels. Back then, people did not have all the nifty gadges we have so huge boxes were not needed. However, today people have many electrical appliances which require a good electrical panel in order to avoid outages.
Are the light fixtures on a pull chain? If so, the home uses knob and tube wiring. Its ok to have this type of wiring, but its outdated and not the safest. Take a look at your electrical sockets, are 3 prong outlets readily available throughout the house? Most older homes, have only 2 prong outlets which may need to be updated to 3 prong to accommodate modern day appliances. Rewiring a home with a new panel, wires and outlets can cost $5-8k for a 1000 sq foot home.
Tips & Warnings
The less issues the home has the better, however if you purchase the house at a bargain of a price and are aware of the expenses involved in fixing the particular issues the home has, it may still be a good deal if the profit margins are right.
The advise above does not replace the need to have a professional inspector inspect the home.
The above should be used as a general process to pre-evaluate a home before cosidering its purchase. Once you have experience with the drudgeries of everything that can go wrong in the home investment business then you could begin to use the above steps along with other criteria to waive the inspection contingency when making an offer on a home (this is not a recommended strategy unless you have experience with home buying or are a general contractor or have lots of friends that are general contractors. However, the ability to be confident in inspecting a home can give you leverage during seller driven real estate markets, since you could in effect waive the inspection contingency in your offer .
How to Finance a Fixer Upper Home
Getting a mortgage for any home can be a challenge, but it's even more difficult to finance a fixer upper.
Perform an analysis on the desired property. Look closely at the property to determine what work you'll need to do in order to make the home livable. You'll then prepare a statement that details the current value of the home, the expected cost of repairs and the estimated value of the home once you complete the repairs.
How to Find a Fixer Upper Home
Real estate investors are constantly on the lookout for fixer upper homes that are cheap yet still in a reasonably good condition. All that a decent fixer upper will require is a small investment to make the space livable and desirable to a prospective buyer or renter. If you are interested in finding fixer uppers in your area, there are a few places where you should start your search.
Bid on properties that are up for foreclosure.
Hire a real estate agent that specializes in finding and selling fixer uppers. An experienced agent can best advise you on whether a property is worth the investment.
Tips & Warnings
Have a full home inspection done before you sign on the dotted line. Sometimes your initial estimates for fixing up the home might not be comprehensive. Use an inspector to identify hidden issues with the fixer-upper property that could be very expensive.
The seller could either accept your bid or place a higher counter offer..In order to win a bidding war with someone over property that you have in your sights, you might have to compromise on your demands. For instance, don't add a contingency that you will only buy the property once you close on another investment first.
How to Remodel a Fixer Upper
Start with an existing house needing a little TLC. Turning a fixer-upper into the home of your dreams can be a satisfying venture. Knowing the ground rules and using your creativity can help you appreciate the true value of your new home.
The residential housing climate is overflowing with opportunities to buy an existing home, mostly fueled by the growing supply of repossessed homes. Many of those homes have been left to deteriorate while financial institutions go through the foreclosure process. The price will likely be attractive, but the work can be overwhelming without a plan. Let's investigate the different areas where your fixer-upper can be as stunning to you as a newly built home.
Plan with the space you have. The interior of the house is where your creativity can be used to express your style. Before you grab the sledgehammer and begin tearing out the wall to increase your kitchen space, get out the measuring tape, pencil and paper and make a blueprint of all floor space. You might decide that the wall doesn't really need to come out.
Color schemes and traffice flow
Three elemental factors learned in design school are color scheme, traffic flow and focal points. Decide on a basic color and expand on the tones. This can be done by visiting a paint store that offers a selection of hues in each of the schemes. Grab a handful of samples and blend throughout your blueprint. The traffic flow should allow you to walk throughout the home without having to stop and turn in order to avoid bumping into something. Cut out small pieces of paper for your furniture and appliances and play with their placement. Next, your home might not have an architectural point of interest (fireplace, bay window, dormers) that you want to accentuate or you might want to place your own focal point within a room. In any case, begin with the focal point and arrange your color scheme and traffic flow around it.
Discover a world of art in fixtures and flooring
Updating worn or outdated fixtures, cabinets, walls and flooring can whip a tired house into a home you can enjoy for years. Light fixtures can reflect your taste in decor, but the fixture itself is not half as important as creating a desired lighting effect within a room. Illumination can turn a dreary atmosphere into a sensuous glow in the living space or bring about a bright spirit in a kitchen. Google modern furniture and lighting and you will find new engineers and artists offering an unknown line of lighting creations, focusing on light usage.Wood planks and tile are today's choice in flooring with area rugs as an accent but wall-to-wall carpeting is always an acceptable choice. If the kitchen and bathroom cabinets must go, remember to stay within your design. Plain is best unless you choose to use the cabinets as a focal point.The same applies for wallpaper and paint.
Most people like a variety of colors, styles and designs, but make yourself stick with the one that you like best so your rooms will flow as one. Take your time and play with your blueprint before you begin.