So.. you want a "Fixer Upper" Part 1_ Why though?
The world is obsessed with fixer uppers. Homes that are less than pleasing to the eye or not "move in ready" for one reason or another. But why? People have been rehabbing and renovating these homes long before the country fell in love with Chip and Joanna. After completing my own fixer upper in 2011, I soon discovered my own reasons.
For most people; acquiring one of these unsavory homes comes down to one of the following or even a combination of; Cost, Equity and Experience.
You have to admit there is something pretty enticing about the price tag. I have seen even the most resistant clients entertain seeking a "fixer upper" based on the price. {Great structure, amazing yard, desirable school district, tons of charm, just in need of some love to make it your own.}We've all seen the listings. If we are talking national averages, a "fixer upper" or rehab property is typically priced 20-25% less than its comparable homes. That's a huge savings if you have access to reasonable contractors or you yourself are handy. These homes are especially attractive to first time buyers, who can put some sweat equity into a home over time but understand the advantages of home ownership over a rental. They just might not have the financing or savings for something in their desired area that's turn key.
For all the number crunchers out there (self included), when it comes to financing something that has a 30 year pay off plan, equity can be your best friend. Let's look long term, market value, rises and falls in values, going into a home knowing your purchase price is markedly lower than the marketable value is a huge plus. It's also smart. Its never ideal to be "upside down" on your LTV (loan to value) meaning your loan is over what the house is worth. In the final quarter of 2016, Maryland's average LTV was 62%. When you purchase something thats priced well below the market value with the intention of restoring it's glory, it's nice to immediately know you are not only heads up on the loan, but you've got a pretty green gap between what you spent and what you're worth.
Then there's the experience. Renovations come with some crazy stories. My own renovation was more than we anticipated and at the time pretty overwhelming to take on. Between myself, some friends, my handy FIL and wife, we tackled a whole house renovation over 5 months.
I went to work then spent my afternoons and weekends at our new home; gutting, replacing, and updating every room. The hardware store knew me by name after the first month. Luckily, I know contractors and am handy myself so we didn't spend thousands on labor. The day to day little stuff can be draining both financially and emotionally. The smallest things, unforeseen can cause quite a headache.
In the end, it all worked out. There was nothing that we didn't suspect would need to be addressed. Looking back at it now, I can laugh at the extension cord that the previous owner used as electric line connecting several outlets together in the living room. But in the moment, the 3 layers of flooring I had to chip away at with a angle grinder, just to get to the subfloor (which was nailed to the floor joist with about 300 finish nails per board) was anything but funny. (See photographic evidence, I told you sometimes its worth the laugh, my wife hated her assignment as crowbar crew.) But thats the experience, those are the stories you hear and the kind of thing you have to be prepared for. You will adjust your budget to cover both dollars and time. You will look back and say: "look what we did. We made this our own." It's special, it's absolutely an adventure. My friends and wife and I, have some great memories and laughs over this house.
You can also make the house how you want it without having to build new. Sometimes expanding spaces, opening floor plans while restoring character and history in a forgotten treasure.
I'm sure there are other reasons but I have found more often than not at least one of these is true when discussing the possibility of a fixer upper with a buyer.
My top tip: Make sure you work with someone who is knowledgeable when it comes to searching for fixer uppers. There are so many variations in work load. I happen to have the advantage of coming from 15 years in maintenance and contracting. I know a doozy when I see one. You will need to know: What can be done on your own pretty reasonably. What needs a license contractor. What could be a few hundred bucks verse a few grand. A knowledgable agent will save you time and headaches when finding and putting offers in on properties to not waste time on inspection after inspection just to find out something is too far out of your comfort zone. An agent can also see great potential in the value once restored. Not every house that's falling apart will yield huge equity so make sure your agent knows the local market and finds you solid comps for the home you have your eye on.
Always get an inspection, even when a home is SOLD AS IS. Better yet, even invest in a follow up from the initial general inspection with the pros if needed. If the inspector says the septic might be failing, call a septic company out to take a look. If the HVAC unit might need replaced, have a licensed HVAC tech come out and run their own assessment and inspection. This can save you big time in the long run. You may decide that this particular home is not a good fit for your skill or wallet. Better to spend the money now and know, then to find out after you purchased the house.
For most people; acquiring one of these unsavory homes comes down to one of the following or even a combination of; Cost, Equity and Experience.
You have to admit there is something pretty enticing about the price tag. I have seen even the most resistant clients entertain seeking a "fixer upper" based on the price. {Great structure, amazing yard, desirable school district, tons of charm, just in need of some love to make it your own.}We've all seen the listings. If we are talking national averages, a "fixer upper" or rehab property is typically priced 20-25% less than its comparable homes. That's a huge savings if you have access to reasonable contractors or you yourself are handy. These homes are especially attractive to first time buyers, who can put some sweat equity into a home over time but understand the advantages of home ownership over a rental. They just might not have the financing or savings for something in their desired area that's turn key.For all the number crunchers out there (self included), when it comes to financing something that has a 30 year pay off plan, equity can be your best friend. Let's look long term, market value, rises and falls in values, going into a home knowing your purchase price is markedly lower than the marketable value is a huge plus. It's also smart. Its never ideal to be "upside down" on your LTV (loan to value) meaning your loan is over what the house is worth. In the final quarter of 2016, Maryland's average LTV was 62%. When you purchase something thats priced well below the market value with the intention of restoring it's glory, it's nice to immediately know you are not only heads up on the loan, but you've got a pretty green gap between what you spent and what you're worth.
Then there's the experience. Renovations come with some crazy stories. My own renovation was more than we anticipated and at the time pretty overwhelming to take on. Between myself, some friends, my handy FIL and wife, we tackled a whole house renovation over 5 months.
I went to work then spent my afternoons and weekends at our new home; gutting, replacing, and updating every room. The hardware store knew me by name after the first month. Luckily, I know contractors and am handy myself so we didn't spend thousands on labor. The day to day little stuff can be draining both financially and emotionally. The smallest things, unforeseen can cause quite a headache.
In the end, it all worked out. There was nothing that we didn't suspect would need to be addressed. Looking back at it now, I can laugh at the extension cord that the previous owner used as electric line connecting several outlets together in the living room. But in the moment, the 3 layers of flooring I had to chip away at with a angle grinder, just to get to the subfloor (which was nailed to the floor joist with about 300 finish nails per board) was anything but funny. (See photographic evidence, I told you sometimes its worth the laugh, my wife hated her assignment as crowbar crew.) But thats the experience, those are the stories you hear and the kind of thing you have to be prepared for. You will adjust your budget to cover both dollars and time. You will look back and say: "look what we did. We made this our own." It's special, it's absolutely an adventure. My friends and wife and I, have some great memories and laughs over this house.
I'm sure there are other reasons but I have found more often than not at least one of these is true when discussing the possibility of a fixer upper with a buyer.
My top tip: Make sure you work with someone who is knowledgeable when it comes to searching for fixer uppers. There are so many variations in work load. I happen to have the advantage of coming from 15 years in maintenance and contracting. I know a doozy when I see one. You will need to know: What can be done on your own pretty reasonably. What needs a license contractor. What could be a few hundred bucks verse a few grand. A knowledgable agent will save you time and headaches when finding and putting offers in on properties to not waste time on inspection after inspection just to find out something is too far out of your comfort zone. An agent can also see great potential in the value once restored. Not every house that's falling apart will yield huge equity so make sure your agent knows the local market and finds you solid comps for the home you have your eye on.
Always get an inspection, even when a home is SOLD AS IS. Better yet, even invest in a follow up from the initial general inspection with the pros if needed. If the inspector says the septic might be failing, call a septic company out to take a look. If the HVAC unit might need replaced, have a licensed HVAC tech come out and run their own assessment and inspection. This can save you big time in the long run. You may decide that this particular home is not a good fit for your skill or wallet. Better to spend the money now and know, then to find out after you purchased the house.
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