Are you combing the real estate market for a house that you plan to live in yourself? Will you be deriving secondary income from it as a rental property? Or are you planning to sell it for a higher price once it is completed and then roll the profits over into your next home improvement project?
What many people don’t think about when they first engage in the excitement of remodeling efforts such as updating their kitchens or bathrooms is the level of inconvenience that will be thrust upon them during the actual process. If you are going to be living under the same roof that you are renovating, is the floor plan one that will be flexible and spacious enough to accommodate shifting your possessions (and yourselves) out of harm’s way?
Having to shower at your local health club or asking neighbors if you can have kitchen privileges may be doable for a few days but if your project hits even a few snags, the anticipated glamour of new surroundings will soon take a backseat to the annoyance of feeling displaced and disrupted. Major renovations that require you to hire outside help will also require you to relinquish a large portion of your privacy as well as to be at the mercy of someone else’s schedule and/or disputes over contract specifications.
Seasonal considerations factor into the mix, too. You may feel lucky to have found the perfect project house for just the right price at the beginning of October. But if a significant part of the overhaul involves replacing a roof and tearing out walls, will you really want to sit on hold all winter until the facelift work can officially begin? Don’t discount the flipside, either. That TLC cottage that looks so charming on a summer’s day may be sitting on a flood plain that will make for an insurance nightmare.
If you have the resources to maintain a separate address during the process, is the proximity such that keeping an eye on this work-in-progress won’t be a chore? While the structure itself may be devoid of furnishings or valuables, an absentee owner still needs to be cognizant of measures that will keep his or her property safe and secure from vandals and vagrants.
Location, location, location is the mantra of buyers and sellers. A foreclosed property that you buy on the cheap may seem like a sweet deal at the time but can quickly become a white elephant if you haven’t done your homework. Haven’t kept abreast of the news lately? If you had, you probably wouldn’t be rushing into ownership of an address where a new freeway was going in behind the backyard or where recent gang violence was making the neighborhood streets unsafe at night.
Are a lot of houses in your targeted region suddenly sporting “For Sale” signs? A good sleuth will ferret out reasons behind the mass exodus and learn to look before leaping into a bad investment. This isn’t the time to be shy about asking the exiting residents what prompted the decision to move on.
Unless you’re already familiar with the area where you want to buy, it is recommended that you work with a real estate agent in finding a fixer-upper that will meet your expectations and your budget. If you’re planning to resell, for instance, an agent will be aware of the demographics, whether the asking price is comparable to similar properties in that location, and the impact that incoming (or outgoing) businesses have had recently on the market.
Let’s say, for example, that a new elementary school is being constructed nearby. This will, accordingly, make the neighborhood more appealing to young families which will, in turn, influence the changes and user-friendly amenities that you could introduce to the existing structure. Accessibility to shopping malls, metro lines and business districts will further put your fixer-upper into a higher state of desirability, as will city/county zoning regulations that could increase its value as a potential B&B, day care center, or home-based beauty salon.
It should also be kept in mind that if a neighborhood has reached its plateau or has even entered a slow state of decline, you may not be able to recoup all of the time, energy and—most especially—money that you have poured into fixing it. Your relationship with your new neighbors may be strained as well, given the amount of potential noise and traffic that your makeover efforts are going to yield during the renovation period. Further, the care—or lack thereof—that your neighbors have put into the upkeep of their own homes and yards will affect the resale value of yours.
If you do go it alone in finding a “handyman’s special,” plan to spend a lot of time driving around, perusing the classifieds, and even checking out community bulletin boards. Study listings of foreclosed properties in the area, as banks are often more than willing to offload marginal homes at a lower price rather than let them deteriorate from neglect. And don’t forget networking! Put out the word to your friends and co-workers that you’re looking for a project house and let them help with your search.
First-timers at the renovation game should concentrate on structures that require a minimum of cosmetic enhancement. Carpets, cabinet facelifts, new wallpaper, etc. are among the changes that make for a snappy turnaround sale. Keep in mind, of course, that your taste may not reflect the taste of your potential buyers. Tempted as you may be to paint the kitchen bright orange with navy blue counters, it’s always better to err on the side of neutrality and let the next owner do something outlandish.
Larger rescue efforts such as room additions, weakened foundations, and roof repairs will not only take more time but also require you to comparison-shop for licensed contractors to perform the work. Conservatively, the value of the property should increase $2 for every dollar that you invest in its repairs. If the estimated cost of home improvements looks as if it will exceed the projected appraisal of the finished product, you would be wise to walk away from the deal and look elsewhere.
Many a prospective do-it-yourselfer has looked at a vintage Victorian and dreamed of restoring it to its original state of elegance. What they fail to take into note, however, is that it almost always involves more than just a fresh coat of paint and a few topiary trees, especially if a number of years have passed since its last inspection for plumbing, electricity, seismic…oh, and don’t forget termite damage.
While the external shell may be charming, the cost of upgrading its internal components to modern code standards can be prohibitive to most buyers. Unfortunately, this is one of the many unpleasant gotchas that surface after the deal has closed. In addition, the older and more “historically/architecturally significant” the house, the more likely that it falls under the protection of preservation ordinances that require any outside changes—including paint jobs—to first be approved by a committee.
Even tract housing can be subject to restrictive permits and regulations if, for instance, it was agreed at the outset that no homes in that community would be over a certain height so as to obstruct anyone’s view of the surrounding landscape.
It also goes without saying that the fixer-upper you have picked out for renovation may not be able to structurally withstand the dream changes that you would like to make; i.e., turning a modest one-story house into a tri-level or removing load bearing interior walls to create an extra large bedroom. If you’re not 100% sure that your plans are feasible, enlist the advice of a professional contractor or architect before you commit to launching your project.
Last but not least, make sure that your purchase of a fixer upper is contingent on the completion of a satisfactory report from a qualified inspector. Participate in the walk-through and make sure you have a clear understanding of the problem areas that are identified. Only when you’re convinced that this is something you feel comfortable investing in should you proceed with buying it.
