By Lee Wallender
House fixer-uppers are more popular than ever. Sparked by economic changes and fueled by the influence of TV home shows and shelter magazines, ordinary folks, not just developers, are purchasing fixer-uppers both for personal use and for profit.
But the ease with which TV crews transform a shack into a mansion is not at all accurate for someone who wants to do this in real life. After you get honest with yourself about why you’re doing this, you then need to assess whether you’re purchasing the right house and how exactly you intend to remodel it.
Top 5 Reasons to Buy a Fixer-Upper
The reasons that a person may take on a fixer-upper vary greatly. Some people have a purely financial reason for doing this and may care little about home design and construction. At the other end of the spectrum are people who believe that the house will be a manifestation of their creative dreams.
Before anything else, decide why you want to buy a fixer upper. Your answer to this question then becomes the controlling theme that will help so many other decisions fall into place.
- You Want to Flip a House to Make a Profit
House flipping means purchasing a residential property for a low price, performing either cosmetic fixes or light remodeling, and then selling it within a year to make a profit.
The heyday of house flipping occurred from 2008 to 2012, when many homeowners were having trouble meeting their mortgages. As a result, houses were being foreclosed on in record numbers. This meant that amateur speculators, not just professional property developers, could inexpensively pick up a house, fix it, and sell it quickly for a profit.
Today, house flipping is still a viable prospect. But according to experts, the profit margin is slimmer and available houses are fewer because the foreclosure market has shrunk, and more people have joined the house-flipping game.
- You Want to Create a Rental Property for Passive Income
Another way to make money with a fixer-upper is a longer-term, slower method: rental. To create an attractive rental property, you purchase a house in need of tender love and care, put money into it either with do-it-yourself fixes or by hiring a contractor, and then rent the property out. Usually, rental leases run for one year at a time. This provides you the assurance of a steady income for a solid year but gives you the flexibility of being able to move the current renters out if you should decide to sell the house.
- You Want a Dream Home for Your Own Use
If you look at that house and can see a diamond in the rough under the dust and spider webs, you are a true romantic, possibly an artist, and definitely a dreamer. Few feelings compare to buying an inexpensive fixer-upper and bringing the house back to its former glory or transforming it into a completely different type of house. This is sheer artistry wrought on a large scale.
- You Want to Fix It, Live in It, Then Sell It
Another reason you may want to buy a fixer-upper is a hybrid reason, part profit and part dream. You purchase a house, fix it up, and live in it for several years before selling for a profit. While you may love your remodeled home, you maintain a sense of detachment, knowing that this is a relationship that is only temporary.
- You Want to Bring Family or Friends Together
As our population ages and families want to stay closer together, many people want to live near their relatives. Grandparents benefit from being near younger generations, and parents love having older folks around as a source of convenient, free childcare. Rather than everyone living together, the solution is to have a separate but near residence. This is often accomplished in the form of a fixer-upper that you alone have purchased, or one bought in conjunction with family members. You buy an inexpensive house, fix it up to a reasonably comfortable, attractive level, and then move the relatives in. With elderly relatives, this often involves incorporating changes that make the house more accessible.
What to Do, What to Avoid
Match House to Needs
Purchasing the right kind of house to fix depends on one of the reasons you’re doing this in the first place. Example: if you are purchasing the house to fix up and then rent, make sure that it is of rentable quality – in all respects. Is it near traffic arteries and bus lines, schools, shopping districts, and other perks that potential renters find attractive?
If you’re purchasing the fixer-upper for family, remodels should ensure safety and general appearance. But since you are not selling the property, the remodels do not have to be flashy and showroom-worthy; they just should be attractive and safe.
Be Aware of Different Levels of Fixer-Uppers
Obviously, not all fixer-uppers are in the same condition. And the condition of homes will be viewed differently by different people. Here are four main levels of fixer-upper conditions, from the most severe and expensive down to the easiest and less expensive:
- Tear Down: This property is so far gone that nothing can save it. The only recourse is to tear it down and rebuild. Sometimes the foundation can be reused. Other times, the foundation was the very reason for the tear-down, and thus it too needs to be rebuilt.
- Strip to the Studs and Beyond: Foundation and underlying house frame are in good condition, but its “skin” is not. Skin includes both exterior siding and interior drywall or plaster. After opening the house, all services – electrical, plumbing, heating, cooling – are removed and replaced.
- Strip to the Studs Only: Exterior siding and interior walls (either one or both) are replaced. Electrical and plumbing services are mostly retained, but changes may be made to bring the house up to date.
- Purely Cosmetic: Structure, services, walls, and siding remain structurally the same. Walls are painted, floors covered, countertops replaced. In bathrooms, toilets may be replaced, and shower/tubs replaced, relined, or refinished.
The first property condition, “The Tear Down,” should only be considered for a contractor, developer or for someone wanting to build a new house from scratch to live in, or as a long-term investment. The “Strip to the Studs and Beyond” type property is only recommended to those who intend on using a contractor for a good deal of the work. The “Strip Down to the Studs Only” and the “Purely Cosmetic”, indicated as 3 and 4 respectively, make for the best fixer upper investment projects. These are the properties that will provide the best learning experience for first timers. Good luck fellow Fixer Uppers!