So you’re in the market for a fixer-upper, something that needs a little TLC before anyone moves in? Here’s a little guide to get you started.
Consider why you want to invest in a renovation.
There are two main reasons someone wants to buy a fixer-upper or a flip home. One is practical and one is financial – though both have financial motivations. Old, run-down homes are cheaper. The more that needs to be fixed, the lower the price typically. Perhaps you’re a first time home buyer with lower income or a poor credit score. This type of home fits within your budget, and you can do a little work yourself to fix it up. You know there’s potential in an affordable flip house like this, so you’re not afraid of getting into something that needs some love. If your motivations are practical you see the financial gain out of flipping a run down, old home. You can spend extra money in the short term to renovate the house and get it back on the market quickly, recouping any losses from the act of renovating. Either way, these are some key steps to making sure you’re prepared for the task ahead.
The first thing you want to do is secure a home loan to know how much you can spend on a home and renovations. Talk to your bank first. They will let you know your standing and what you need to do in order to secure a loan with them given your longevity with the institution and the health of your bank accounts. I also recommend speaking with other local home loan lenders. You may find differing needs when securing a loan.
With your finances in view you can really start the fun part: house hunting. The search can take a while, especially if you have a smaller loan available. The Colorado housing market in particular has seen a depletion in lower priced homes, ready to be flipped. And with the COVID effect keeping inventory low, finding the perfect fixer-upper may be difficult in the Front Range. Patience is key in this stage of the journey, especially in this area. Keep refreshing your searches in the towns, cities, and neighborhoods that you want to live in. A treasure might pop into the listings that’s perfect for your project home.
What To Look For
Once you’ve found a home that looks ready to transform into your vision you’ll want to check a few things before committing. Make sure to have an Home Inspection done. This will inform you of any major issues of note. They will be able to tell you if the foundation is good, if the electrical and plumbing are up to code, and if you’ll need new windows, doors, or fixtures. It’s a good idea to be around for the inspection so you can ask questions and get further details about the property in which you’re looking to invest.
The inspections are over. A choice has been made. You’re now ready to close on the house and start to start the renovation process. You’ve probably already created a plan in your head, born of the inspection report, but now it’s time to put that plan on paper, get quotes from contractors, and establish a solid budget for your renovation. One suggestion is to create 2 budgets, a high budget and a low budget. Assume things are going to cost more than you believe and take much longer than you expect.
The best way to keep your budget low is to go shopping and buy things for yourself, and take care of whatever projects you know are within your skillset. Some contractors will want to purchase materials as part of their bid. Most of the time contractors get discounts on their materials. When you’re out shopping at Lowe’s or Home Depot, double check the prices you see on the bids you’ve received from contractors and decide what avenue is most cost effective for you.
Most important of all: Be patient. Big projects always take longer than expected – and if you’re in a big renovation new problems can always arise, setting back your finish date.
Hard Work & Determination
Well… It’s time. Get in there with your contractors and help in any way you can. Get little projects out of the way to save time and money. If new problems arise that aren’t within the scope of work, try to take care of it yourself. There are so many things you’ll learn during the process, especially if you’re lending a hand the whole time. You’ll know your home inside and out!
When the final coat of paint has dried and the tape has been removed; when the water gets turned back on and the faucets run smoothly; when the lights turn on and music echos radiantly throughout your property you know the project is finished. It’s not time for an appraisal to see what your handiwork has brought you. Whether or not your flipping this house or looking to live in it long term, the equity should have increased – and hopefully at least as much as you put into the project. Even if the housing market takes a downturn you can utilize the property as a rental to help create a passive form of income. But the best rewards are for yourself and the larger community. You’ll have the memory of renovating a property. The neighborhood has one more beautiful home to share the market. Everyone wins!