Buying a home at a bargain so you can fix it up could be the culmination of a lifelong dream, or it could be a nightmare. Though the idea of buying a home affordably and having the opportunity to make upgrades that will best suit the buyer's dream may seem like a dream come true, buyers may inadvertently purchase a money pit that offers up disaster after disaster and only succeeds in frustrating the owner. With the answers to these four questions, you will know if you are ready to buy a fixer-upper, and how to spot a good deal.
How to Ensure the Fixer Upper is a Good Investment
The best way to approach buying a fixer-upper is to look at each property individually and make a decision based on that home alone, be it in North Calgary or elsewhere. Buyers might be in the market for a home with significant faults and hoping to get an excellent price, but not every property that meets these criteria is going to be the right choice. When viewing a home that does not require a ton of work and seems to be under-priced for the area, try to investigate further. Get a home inspection to find out what the home needs in order to be move-in ready, because a lot of problems may be hiding behind your sight. Use the report as a guide to the necessary preparations to take on all the projects, as well as any upgrades that might be wanted.
Cosmetic Work Versus Full Renovations
Before jumping in with both feet forward, take some time to understand the major differences between simple cosmetic work and full renovation projects. It's easy to paint a home, change floors, put in some new cabinets etc. These projects won't cost a lot and you won't have to ask for any permits to make the changes. Anything substantial, however, that involves electrical and plumbing, can run into thousands of dollars and in the worst-case scenario you may not get approval to go ahead with the project at all.
Select A Maximum Home Purchase Price
It's easy to fall in love with a home that needs fixing up. You may view a home and then formulate a bunch of plans in your head about the possibilities and the projects you could do to bring the property back to life. Sometimes other people will also have fallen in love with the property and you may find yourself in a bidding war for a home that needs some extra care.
You need to be particularly cautious with these types of bidding wars. You certainly won't want to overpay on a home that needs work. Make sure that you have a maximum price that you'd be willing to pay for the home in question and stick to this amount no matter what. A handyman's special is only worth it if you end up coming ahead when all is said and done.
Get 3 Estimates on Home Repairs
Before putting in an offer for the home find out exactly what's wrong with it through a home inspection. Then, get an estimate from 3 different contractors regarding the work that would need to be done. This will help you plan out exactly what you can afford to offer since you'll have a rough idea ahead of time of the renovation pricing.
Buying a fixer-upper can be one of the best investments you ever make as long as it is done the right way and backed by a bit of research. In order to find homes that require special attention, you can contact your real estate agent.
Is the Home a Great Bargain?
Buying a home that needs some work or just a little extra care is going to cost you more money than a simple mortgage. This means that you should be getting the home for an excellent price. After all, if you expect to put in tens of thousands of dollars into the property before you move in, that money will have to come from somewhere. Ask your real estate agent for comparable prices on homes that are similar to the property in question, with the home improvements you plan to make. If the sale price allows you plenty of room to move, it might be a good choice. Lenders are often willing to grant funding to make improvements, if the mortgage loan does not exceed about 95 percent of the home’s estimated future value.
Does the Property Have Growth Potential?
If you know that the property is selling for a good price compared to what you can do with it, you should also invest the time to be sure that it has growth potential. Current value and future value are only tangentially related. Neighbourhoods can rise and fall in value depending on the condition of all the properties, and how many buyers want to move into the area. You will probably want to sell the home eventually, so buying a property in a place that has a solid future is a good bet. Research the history of real estate for the area, and ask your real estate agent if the region is due for a correction in home prices.
Can You Invest the Effort?
With a good idea of what you will have to pay to fix up the property, as well as a firm understanding of what needs to be done, you can decide if you are up to doing the work. This requires a fair deal of soul-searching and honesty about what you want from the property. Fixing up a home can influence your life from a few minor tasks you have to do on the weekends, to months of preparation before you can even move in. Confirm that everyone in the household is willing to work with the limitations set by the unique property, since all members of the family have to live with the result long-term.
Buying a fixer-upper could be an excellent way to buy a better home and customize it just for you. By answering these questions, you can go into the purchase with a clear head and an eye for a bargain.