Buying a home that requires a major renovation may take more coordination than you think. Here are four questions to ask yourself before taking the plunge.
By Steven Gottlieb, Contributor |June 18, 2019, at 10:39 a.m
An old home that hasn’t been updated in decades may require a more thorough renovation than you expect – not to mention the right professionals to help you get the job done. (Getty Images)
A couple currently on the market to buy a home are looking at two different types of properties: turnkey condos, in which the home is basically move-in ready, and then what these clients affectionately refer to as “Great Grandma’s place” – or homes that have not been touched in decades and need a gut renovation. The wife is an architect and decorator, and she is hungry to take on a project.
A turnkey property allows the couple to purchase a home at the top of their budget. Alternatively, a fixer-upper that needs work on just about everything – often referred to in the real estate industry as “estate condition” – will require them to factor the projected cost of the renovation into their budget when assessing the contract price.
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When purchasing a home, condition is one of the five most important factors to consider, along with price, location, size or layout and wow factor – or lack thereof. Because a turnkey property has already undergone its renovation, if you plan to finance the purchase you’re essentially financing the cost of making the home move-in ready as well. For a property in estate condition, however, financing the cost of a renovation can be harder, and you may be paying cash for the work.
Most buyers who plan to take on a renovation hope that after all the blood, sweat and tears – and sawdust– they’ll have a home that is customized to their own standards and taste, and ultimately spend a net total of less than the price of an equivalent move-in ready home.
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Properties that need work generally trade for significantly less than their renovated counterparts. Two homes on the market with similar square footage and layout, location and architectural style will generally sell for very different numbers if one has been renovated to today’s standards and the other has not been updated in decades. This means that there can be a great opportunity if a buyer is willing to take on a project, understanding what this entails.
The scope of work required is something any homebuyer should take into consideration when searching for a new property. No matter what, you’ll likely have to paint, but renovating a kitchen and bathrooms, rewiring and moving walls are another ball of wax.
Depending on a buyer’s bandwidth, connections, budget, and timing, buying a fixer-upper and taking on a renovation can be a great option to save money in the purchase price and, in the process, create a customized space that can be a real source of pride.
Here are a few reasons why buying a fixer-upper might (or might not) be the best option for you.
Before deciding to buy a fixer-upper home, ask yourself these four questions:
- Do you have the bandwidth?
- Do you have the architect or contractor connections?
- Do you have another place to live temporarily?
- Do you have the vision?
1. Do You Have the Bandwidth?
In today’s world, we are pushed and pulled in many directions, juggling the obligations of work, family, friends and day-to-day errands. Adding a big, stressful project – with economic consequences, no less – is more than many people can handle. If your shoulders are wide enough to take on renovating a home, you can be at quite an advantage to buy a discounted property that is an overwhelming prospect for much of the buying public.
Many buyers will pay a premium to avoid taking on the significant hassles of a renovation. The commitment is not small: Undertaking a renovation entails not only hiring the right people, but also the flexibility to visit the site on a regular basis and taking the time to shop for materials and appliances.
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2. Do You Have the Connections?
Do you know architects, contractors, project managers or other people in the construction business? Can you find some that you trust? Hiring the right people can make all the difference, in part because time is money. A project manager or general contractor can streamline the process and keep subcontractors on task and on a timeline. Furthermore, they often have connections for better prices on materials and appliances.
3. Do You Have Another Place to Live?
While you’re renovating, you might not be able to live in your new place. Although some people can live through a kitchen renovation – especially in a city with good takeout options – or other aspects of a gut job, you can’t live without a bathroom.
When budgeting for a renovation, you have to consider that while your new home is ankle deep in plaster dust, you will likely need to live somewhere else, and generally, that’s not free. Do you have the budget to carry two homes, or rent something economical while renovating?
If a nearby friend or relative can put you up this can be a great way to save, but beware of the strains it might cause on the relationship.
[Before You Buy: Conducting Due Diligence on a Property]
4. Do You Have the Vision?
Be honest. Some people are just better at envisioning and then seeing a project through. The wife in the house hunting couple not only has a vision but the industry connections, so she can see what she wants in her mind’s eye and also explain it properly to her subcontractors and properly manage them.
Conversely, her husband is a genius certified public accountant and tax attorney, but isn’t exactly creative.
Without her, he’d be totally overwhelmed at the prospect of a renovation. If you don’t have the vision to help you get started, you may be better off looking at homes that don’t require as much work and creativity.
