“Fixer upper.” Those words have become almost ubiquitous in our culture, thanks to HGTV and its roster of charming celebrities, including Chip and Joanna Gaines.
Home-focused TV shows are all the rage, and they’re inspiring countless people to think big when it comes to their real estate search, dreaming of all of the renovations and changes they could make to transform a property into their deluxe dream home.
For others, it’s all about “flipping” a house for profit. That is, buyers see the potential of investing their time and money to fix up a property, so that they can then turn around and sell it for a higher price.
Now, these fixer upper and home flipping shows are certainly entertaining while sitting on the couch and enjoying their shiny results thanks to the magic of editing. But it’s worth asking yourself: What’s at stake when it comes to actually taking on a fixer upper?
While this type of home purchase is going to be a great fit for some buyers, it’s definitely not for everyone. Are you really ready for everything that goes into handling a fixer upper property? Here are a few key things to ask yourself as you weigh the pros and cons of investing in a home that comes with a laundry list of improvements and projects:
1.) “Why Am I Interested?”
It’s easy to become inspired and intrigued by taking on a fixer upper when that process is packed into a half hour of finely-edited TV — complete with jump cuts, picture perfect lighting, and fun musical accompaniment. But when you actually start to figure out your timeline, talk to contractors, and see those construction boots start to hit the ground — well, that’s when the reality sets in for many homebuyers.
Before you and your real estate team put all your focus on “fixer upper” properties, it’s worth taking some time to make sure that this type of property will be the right fit for you and yours. What about a fixer upper appeals to you? Are you someone who becomes excited and inspired by a large project, or do you tend to get overwhelmed? You may be enticed by the prospect of an affordable price in a great neighborhood, but do you have what it takes to take on the projects and hassles that are most likely going to come your way?
The bottom line is that taking on a home with lots of projects may be the right fit for buyers who love to get their hands dirty, or who have a flexible schedule that can allow them to delay moving in, or find the time to invest in additional home projects. Some buyers are ultimately going to be fulfilled and happy by the prospect of rebuilding their home to their specifications — but for others, it’s simply not going to be worth the effort and cost. Be honest with yourself at the beginning of the process, so you don’t end up feeling frustrated or disappointed down the line.
2.) “Do I Really Know What I’m Going to Be Dealing With?”
When coming into a grand project like a fixer upper or a house flip, you need to do your research. What are you getting into, and will you be fully equipped to handle the challenges that may arise?
As you consider the idea of investing in a fixer upper, it may be beneficial to talk to your real estate broker, and ask them for insight. Your broker may be able to give you some key information that could help make things easier, including current and historical market trends and conditions for the neighborhoods you’re shopping in.
Your real estate pro can also share past stories and experiences they may have, and help provide you with information about the home features and projects that are in-demand with buyers, or which historically tend to see the highest return on investment (ROI).
It may also be worth spending some time researching online, or talking to other homeowners or professional house flippers who have undertaken a project like the one you’re considering. Getting a feel for how past projects have been done can give you a better idea of the process you may be in for. It’s worth considering how long different renovations and repairs can take, the costs that are involved, the possible difficulties or legal complications you could run into, etc. Dig into the details with a professional’s help, and you may be able to start “Demo Day” without missing a beat.
Another key thing to understand, early on, is your timeline. Think about your schedule, weigh the amount of time your project may take, and think about if you can make that timetable work. Be honest with yourself. Are you willing to undergo the process for however many weeks, months, or possibly even years it could take?
It’s important to remember that significantly updating a home may be a labor of love, but it’s also going to be a project that requires a significant investment of time and effort. Assess what will have to go into the whole of your fixer upper or flip, and carefully consider what you want to achieve, as well as the limitations that may make your ideal situation unrealistic.
3.) “Do I Understand, and Can I Afford, the Potential Costs?”
The extensive labor and materials needed for a complete home do-over are going to cost a pretty penny. As you consider the potential of investing in a fixer upper property, you’ll want to take a good deal of time to break down specific costs, starting with the pricetag of the overall renovation. Remember that while you may eye a steal on a home due to a low list price, the costs involved with remodeling and repairs could send your overall costs skyrocketing.
Consider the work that may need to be done to a specific property. Are all of the fixes going to be fairly affordable, straightforward “cosmetic” fixes, such as repainting walls and changing fixtures? Or are you going to have to deal with some less obvious expenses, like replacing the water heater, upgrading the HVAC, or even having to repair a staircase or foundation that’s not up to code?
Be sure to run over all of these expenses, taking time to account for both the obvious “must-dos,” and considering the potential for hidden costs. The worst fate is to end up with a money pit you weren’t aware you had. Make room for mistakes and hopefully, you’ll end up with some breathing room in the budget to for possible add-ons or helpful cosmetic extras.
And consider the separate, but relevant, costs that you may not have been expecting. For example, you may need to put your family up at a hotel or a rental property while you’re finishing renovations. You may need to take out a line of credit, or a home equity or improvement loan. Be realistic about all of the expenses that may go into this process.
Finally, remember that the home professionals you see on TV are often able to keep prices low by doing everything DIY; in other cases, professional “flippers” tend to have deals in place with contractors, suppliers, equipment rental companies, and so on. Permit costs, labor costs, supply costs — all of these are expenses you’re most likely going to have to deal with on your own, without the benefit of years of personal and professional relationships.
Finding the Home That Works for You
Want to talk over your unique personal and financial situation with someone who gets it? That’s where Baird & Warner comes in. Our thousands of hyperlocal agents are experts in all things Chicagoland real estate. We’re here to make home buying easier, at every step of the way. And remember, with real estate, mortgage, and title services all under one roof, we’re your one-stop shop when it’s time to make your loftiest home dreams come true.