We appreciate our guest bloggers that contribute to our blog. Enjoy this guest post from Megan Cooper with Real Life Home.
Purchasing your first home is an exciting milestone. Whether by yourself or with a partner, transitioning from renter to homeowner is a big deal. However, as you’ll quickly notice, there are endless options when it comes to the types of available housing. From new constructions to older builds with character, there are plenty of styles from which you can choose.
Among new home buyers, one popular option is to purchase a fixer-upper. While the payoff can be big, as Motto Mortgage points out, there are some things that you should be aware of. Prior to purchasing your first fixer-upper,here’s what you need to know.
Set a home buying and renovation budget
If you plan to purchase a fixer-upper, your budget won’t be as clear-cut as if you were purchasing a newer property. Normally, you set one budget for your home. In the case of a house that needs significant renovations, you’ll have to decide how much you can spend on the property itself, and how much you can afford in renovations. You will need a mortgage for the actual home purchase, and Bankrate notes that you will need separate financing for any construction or DIY improvements. Obviously, it is ideal to have the funds saved up for all home projects. But, if you are not able to afford all improvements in cash, you will need to apply for a separate loan. Work with a financial professional to get pre-approved for the loans that work best for your budget.
Decide what kind of work you’re willing to do
Fixer-upper properties can require everything from cosmetic updates to massive work on the core systems of the house. Depending on your skillset and budget, you may decide to take on some (or all) of the improvement projects yourself.
If you won’t be hiring professional assistance, decide what kind of work you are willing to do. You can do this by assessing your individual skills, budget, and schedule availability. For example, if a home requires extensive electrical work and other major repairs, decide whether the time and money investment are worth it in the long run. Creating a list of pros and cons will help you decide what properties are worth the work, and which ones you can pass on.
What you need to know before buying a property listed in “as is” condition
Some fixer-uppers are listed in “as-is” condition. Properties with this designation are often extremely inexpensive, yet have major flaws that need to be addressed. These issues can range from several repairs to months of expensive labor.
Those who are considering purchasing a home in “as-is” condition should be mindful of any red flags. Some homes will be in such terrible condition that the low price tag doesn’t compensate for the extensive renovations that need to be completed. Prior to purchasing a home that is listed with an “as-is” status, consult with a lawyer. Additionally, have the property thoroughly inspected by professionals like DW Slater Company, and review all land records for deal-breaking issues.
Many people buy fixer-uppers with the intention of turning them into vacation rentals or tenant housing. If you plan to do this, establish your business properly so you can claim appropriate tax deductions. This step will also set you up to get an employer identification number (EIN), also referred to as a Tax ID Number, which will help you get a business bank account and acquire financing.
Ask as many questions as you can
Have questions while touring a fixer-upper? Ask your real estate broker and inspector everything you can think of before committing to the purchase. Get to know the property as well as you can so that there are no surprises.
Work with a real estate expert to find the best property
Purchasing a fixer-upper comes with inherent risks. Rather than going at this process alone, enlist the help and expertise of a real estate professional who can help you navigate the tricky waters of purchasing the perfect fixer-upper home.
Although challenges can arise, having knowledge and a real estate professional on your side can make purchasing a fixer-upper a positive experience. Taking this approach will ensure that your first home has manageable repairs that are within your budget and scope of expertise.
Guest Post by Megan Cooper
Megan Cooper thinks there’s nothing more satisfying than a well-executed DIY project. For her, it all started a few years ago when she built a bookshelf out of reclaimed wood. She hasn’t looked back since. Today, she regularly tackles home decor DIY projects big and small. She created reallifehome.net to share all of the tips, advice, and resources that she has found most useful as she’s learned the ins and outs of DIY.
DW Slater Company provides residential and commercial real estate appraisals, appraisal reviews, valuations, inspections, and construction draw inspections for North Texas. Reach out today to find out more! 214-543-1653 or 940-597-3533
Shannon is a Certified Residential Real Estate Appraiser and serves as the Vice President of the DW Slater Company. She joined David at the DW Slater Company in 2006. Shannon graduated Cum Laude from the University of North Texas with a BA degree. Prior to joining the DW Slater Company, she was an Elementary School Teacher for the Pilot Point Independent School District. Shannon is an FHA Certified Appraiser. Shannon is a designated member of the National Association of Appraisers and a member of the Association of Texas Appraisers. In her free time, Shannon enjoys spending time with her family, singing in a local church choir, and tandem cycling with her husband.