Home flippers make a living by purchasing fixer-uppers and turning the houses into dream homes for others. While the market has a number of houses with dated baths and kitchens or exteriors needing some sprucing up, not all fixers make good candidates for home renovation. Understanding how to work the numbers for renovations and exploring your own skills and abilities will help you to make a smart decision in selecting a fixer.
The first evaluation for buying a fixer-upper is to do the math. If the estimated costs for the repairs combined with the home sale price far outbalance the price of any homes for sale in the neighborhood, don't go near a sales contract. Even if you plan to live in the house, the resale value is important.
Skill Set Matching
Making a list of your own skill set and renovation talents helps decide if the fixer is right for you. If your skills involve decoration and basic plumbing repair, select a fixer-upper house requiring these talents. When your abilities involve skills requiring licenses in your state, research the laws to determine if your repairs have the potential for recognition by local authorities. If the county only allows repairs by a licensed electrician, it doesn't matter how expert your talent, you'll still need to hire a professional to work on the fixer. Evaluating your skill set in this way should help narrow the fixer selection.
Review your list of construction experts to develop a potential crew for your fixer selections. Take a close look at the property disclosures and make a cross match to your crew. If the house needs electrical repair and you don't know an expert electrician, take a pass on the fixer. High-quality professionals charge more for repairs compared with the unlicensed, but the workers save money in the long run by doing the repairs according to codes so your fixer passes city or county inspections. If you don't have the crew for the fixer's needed repairs, keep shopping.
Major Structural Issues
Potential structural problems with your fixer include foundation defects and roofing issues. Repair of these defects means major financial expenses. Unless you have unlimited funds, or the home has great historic value, pass on fixing homes with major structural issues. Hire a structural engineer and roofer to make a formal inspection of your potential fixer before signing the sales contract. The inspection fees are nominal compared with the major repair costs you might be hit with.
The structure for a potential fixer might be right up your skill set and in line with your expert network, but if the land has major problems, it's best to pass. Lots with flooding issues or improperly graded or compacted soil mean no matter how wonderful the renovation, you'll still have a fixer-upper house. If you find a parcel priced only on the value of the land, but the property also features a house fixer with foundation damage, it might then be worth lifting the house off the foundation and doing major foundation repair. Selecting a market-priced renovation requiring this level of repair, however, typically won't be worth your efforts.
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- Wall Street Journal: Is Your Home a Good Investment?
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