As home prices and interest rates remain high, house hunters may get creative and think about buying an old, fixer-upper house. You know going in that there’s work to be done but is it worth it? We’ll take a look some pros and cons to help you decide for yourself.
Buy your old, fixer-upper house cheaply
When buying an old, fixer-upper house you should get it at a good price. Always factor in what your renovation is going to cost when deciding what you offer and set yourself a hard limit at what you might go up to. Do not get caught in a bidding war with an investor or other home buyer. Even if you hire an experienced, professional home inspector and general contractor take a look at the old house, they may not have found every small thing that needs repaired. Keep these things in mind when placing an offer.
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Make sure the renovation aligns with your timeline
Old, fixer-upper homes usually require extensive renovation which takes a lot of time. You can speed things along by hiring a licensed general contractor. However, you’ll still need to get a ballpark timeline from your contractor and then factor in another couple weeks of buffer time in case weather or something else slows down the renovation process. Depending on how extensive the renovation process is, you’ll have to plan to live in your current home or find somewhere else to stay until your renovation is finished.
If you’re handy and feel you can handle the renovations yourself, be honest about the time you have available to work on the old house. And plan for the unexpected. You might uncover certain issues when you begin the renovation that are outside of your experience. Always plan for the renovation process to take longer than expected.
How to fund a renovation of an old, fixer-upper house
Before you start looking around for an old, fixer-upper house to buy, you need to have a solid idea of how you’ll finance both your home purchase and the renovations. Here are the six to consider:
- Fannie Mae HomeStyle Renovation loan
- Freddie Mac CHOICERenovation loan
- Freddie Mac CHOICEReno eXPress loan
- FHA 203(k) loan
- VA renovation loan
- USDA renovation loan
VA renovation loans are backed by the US Department of Veterans Affairs and gives military service members and vets to buy a home with no down payment and the renovation loans are the same.
The USDA renovation loan allows people living in rural areas to purchase a home and finance the cost of renovations and repairs. No down payment is required. The USDA backs these loans for low-income homebuyers so be sure to check the income caps for the area you are searching in.
Keep in mind the value you’re adding
Ideally, once you’re done renovating your old, fixer-upper house, you will have added enough value to have gained equity beyond what you borrowed to purchase the house. When you’re fixing things, prioritize the things that make the home livable and help it meet local codes. Then, move onto the things that add value to the home. Make sure to be on the same page with your contractor with this.
Get multiple home inspections
Do not trust one set of eyes when deciding which old house has the “bones” on which to renovate and build your dream cheap old house. There are many hidden issues in these types of houses and one missed problem could end up costing you thousands. Find the pickiest home inspector you can find and don’t be afraid to show the home seller and ask for repairs after the inspection. It may be worth having the electric, sewer, and HVAC inspected too if you’re serious about the old, fixer-upper house you’re looking at.
