When Is a Fixer-Upper a Good Investment?
By tonyadmin . October 5, 2022 .
You’re handy with a hammer? You don’t mind a challenge? You’ve got a good imagination? You can roll with it when things don’t always go as planned? Then you might be well suited for that fixer-upper home you’ve been eyeing. Here are some tips from The Rotary Club of Oshawa-Parkwood to help you know if that project you’re thinking of taking on is a good idea, or if you should keep looking for a better fit.
First, get a cost estimate for repairs and round up. Things will always cost more than you think and unexpected problems arise. Add in the cost of your labor too, since your time is part of the cost. Ask a realtor for an honest estimate of the home compared to other properties in the area and subtract your cost estimate from that amount. Then, add 10% for unexpected costs. The remainder should be your offer.
The ideal fixer-upper will need cosmetic overhauls only. Replacing drywall, painting interior and exterior walls, replacing kitchen cabinets, counters, plumbing fixtures, lighting, carpets, and flooring are all doable repairs that can pay off for you when you sell. The repairs that may put you upside down on the project are structural like foundation upgrades, electrical overhauls, and roof replacements. These may cost more than what you’ll ever get out of the property, especially since those types of repairs can take a long time. You then run the risk of the market fluctuating, making the home’s value drop.
One project you should never DIY is fixing plumbing issues. Repairing your own plumbing may create a new issue that’s more difficult and costly to repair, which is why you should reach out to professionals for all your residential plumbing needs.
You’ll want to do as much of the work as you can to save money on contractors and tradespeople. Be realistic about the things you can do and the skills you lack. Most anyone can wield a paintbrush and pull the old carpet up. Even tacking up drywall and siding can be mastered easily, as can staining wooden decks and fencing. You can find loads of online help for learning how to do the more complicated repairs like how to hang cabinets or replace countertops. The level of expertise needed to install carpet may be above your paygrade, but not impossible. Whatever repairs you do yourself, make sure you’re not being penny wise and pound foolish though, since undoing a botched job will cost you more than if you’d hired a pro to do it initially.
If you have a Habitat for Humanity Restore within a reasonable driving distance from you, they are a wonderful place to purchase a lot of the building supplies you’ll need. Many contractors and builders donate both new and used building materials, appliances, and other home use goods to the non-profit who then sell them to raise money for their work building affordable homes for low-income families.
Be sure to give your new property’s yard attention, too. If you plan to sell or rent the property, you’ll want to give it great curb appeal, which may include painting the exterior and upgrading the landscaping. You can do most of this yourself, but if you need a tree removed or trimmed, contact professionals. The best tips for finding local tree trimming services are to use a search engine that allows you to input your specific needs, and to read the reviews before contacting any company. Tree trimming takes skill and experience, and you want to avoid any damage made by inexperienced contractors.
If you’re interested in purchasing a fixer-upper with an eye to turning it into a vacation or long-term rental property, then heed the words coined by British Real Estate tycoon Harold Samuel: location location location! Look for a promising property that is in a great location. The better the location, the more money you’ll get for the property once it’s ready. But if you’re planning to rent the property as a vacation rental or short term rental (like AirBnB), you’ll want to secure an EIN and make your business official. This number allows the IRS, credit card companies, and other financial entities to track your business finances separate from your personal ones.
You may also want to consider hiring a property management company since they are best equipped to not only fill vacancies, but do it with tenants who have been properly vetted. Most will have reliable maintenance and contracting professionals they employ to manage the rental for you.
Once you’ve decided to take on your home renovation project, be prepared for the rollercoaster of ups and downs both emotionally and financially that go along with it. But, it can also be the most satisfying and fulfilling thing you’ll ever do. You had a dream of starting a fixer-upper business and saw it through. Good luck and happy fixing!
The Rotary Club of Oshawa-Parkwood aims to “make a difference” at home in Oshawa, in Ontario, throughout Canada and around the world, by devotedly living the Rotary motto “Service Above Self”. If you have any questions, please email email@example.com.