Taking on a property that is in need of renovation can be both daunting and exciting, but it can also be either a good investment or a black hole into which you will end up pouring more than you can afford to spend.
There are many reasons why people may want to consider buying a property that is in need of repair.
You may want to get hold of your dream home, but are perhaps unable to afford anything in perfect condition. You probably see the renovation project as a fairly long term challenge, and one which will end up saving you some money. You may intend this to be your home for a long time to come, perhaps the rest of your life, so you want to put in all the personal touches and work that will make it truly your own.
Your intentions might be slightly more financially oriented, however. You could be buying a property in order to rent it out. Choosing somewhere that's in need of some work will allow you to renovate it and then raise the rent. You might be buying a large building, or just a single tiny flat. You might be intending to do some minor fixes, or a complete renovation, but you are not intending to live there yourself.
You might be buying a property with the idea of renovating it and reselling. You see that the asking price is below the market average for that sort of property in that neighborhood, and that by improving the condition of the property you will be able to raise the price when you put it back up for sale. You will be intending to spend less on the work than you will make from the price increase.
Whatever your intentions are in buying a fixer upper there are a number of points that you should consider.
First, what will be the impact on the value of the property compared to the price of the renovations? This will be especially important if you are intending to sell the property on, but even if you are going to be living there yourself you should have some idea of whether it will actually work out as cheaper to buy a house and fix it up then to buy one that is already in good condition. If you intend to rent it out, then you need to know how much difference your work will make to the rent that can be charged- and whether you are likely to find tenants willing to pay these higher prices. If other similar properties in the same area have recently been renovated and resold this can be a good guide to what you can expect. You will need to understand the local house prices and also have a fairly certain estimate of what you are likely to spend- always allowing for any extra, unforeseen expenses. Getting the property thoroughly checked before you agree to buy it is essential. You should know exactly how much work needs to be done on it, and have some idea of what this is going to cost.
Secondly, you should know how much work you are going to be able to put into the property. How much time and money do you want to put into it? If you want to cut costs by doing some of the work yourself, then how much are you actually able to do well? If you are intending to rent out or sell on the property then you will need to make sure everything is as professionally finished as possible. You will also need to comply with all safety codes and regulations in your area.
Thirdly, you should be confident in your ability to manage the renovations, including being able to source tools and materials if you are going to do any work yourself, or to deal with builders and other professionals if you will be employing them. Make sure you understand what needs to be done, and that you are aware of what it should cost before you get someone in to take a look. Ask for estimates from a number of different companies, particularly on large renovation projects. If you need to live in the property during part or all of the work then make sure you will be able to do so safely and as comfortably as possible, or that you will be able to arrange for and afford alternative accommodation when necessary.
