Did you know that 43% of Americans would take on a fixer-upper? If you are looking into buying a house in the near future and are curious about how to buy a fixer-upper, you are in the right place. We have put together this short guide to share everything there is to know about buying a fixer-upper house.
Keep reading to learn the ins and outs before you make this investment.
1. Do the Math
You want to make sure you also take the renovation costs into consideration. Add up the cost of the potential home along with an estimate of how much it will cost you to renovate. Overestimating is highly recommended because you never know what surprises will be behind some walls or the floor once you start demolition.
You also want to figure out a rough estimate of how much the home will be worth after you fix it up. If you find that there are too many structural improvements it is best to say no and find a different fixer upper. The reason is that major repairs such as extensive roof repair, plumbing overhauls, foundation upgrades, etc are “invisible” repairs that hardly raise the value of the house.
Because most people do not have a ton of extra cash lying around, paying for the renovation can be challenging. There are different ways to pay for the renos if you are not left with much money to cover the remodel after you pay closing costs and your down payment.
You can borrow against the cash value in your 401(k) retirement plan if you have one. If you have a stock portfolio or a life insurance policy, you can also borrow against those. Another option is taking out a renovation loan with either a mortgage or a home equity line of credit.
If you choose a home equity line you can usually borrow against 90% of the home’s current equity.
3. Check Permit Costs
If you are not familiar with the permit requirements in the area we recommend asking local officials if the work you are planning on doing will require you to take out permits. If there are permits required make sure you also take the costs into consideration.
We do not recommend taking any shortcuts with permits because if you choose to not take them out to save time and money they will haunt you in the future when you try to resell your home. Instead of opting to skip permits, factor in the money, time, and aggravation of taking them out into your fixer-upper plans.
Now You Know How to Buy a Fixer-Upper
We hope that now that you know how to buy a fixer-upper, you are feeling more confident during your house search. Happy house hunting!
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