In places where housing costs have run up significantly and are approaching a peak, even buying a fixer-upper that seems reasonably priced may be too expensive.
Or you could install a bay window where there was dry rot in a wall.īut you also don't want to overimprove: For maximum resale value, remodeling investments should not raise the value of your house more than 10 to 15 percent above the median sale price of other houses in your area, according to the National Association of Home Builders. If you're replacing the roof, for example, you could add a skylight at the same time. Sometimes it's possible to fold cosmetic improvements into a structural repair to increase the value of a fixer-upper. Such projects usually cost as much as or more than they return in market value (the exception to this is adding a bathroom, which can be worth twice as much as its cost). New lighting fixtures, doors, window shutters, and siding, as well as updated kitchens and bathrooms, are also lucrative improvements.įalling in between structural and cosmetic renovations are major additions needed to bring the house in line with its neighbors, such as a family room or third bedroom in a community of three-bedroom homes. The ideal fixer-uppers are those that require mostly cosmetic improvements - paint touchups, drywall repairs, floor refinishing - which generally cost much less than what they return in market value.
How to Buy a Fixer Upper: Pick Projects That Pay That's because major repairs - plumbing and electrical system overhauls, foundation upgrades, and extensive roof and wall work - are usually "invisible" and hardly ever raise the value of the house enough to offset the cost of the renovation. If the house needs significant structural improvements, many real estate experts recommend avoiding it altogether. The inspector will document a serious problem or two, and you can use the findings to get the seller to pay for repairs or negotiate the sale price downward. Often with fixer-uppers, it's something in between. At best, the inspection will assure you that the house is a good investment at worst, it will help you back out of the deal. It's essential that the real estate contract include an inspection clause. Then deduct at least another 5 to 10 percent for extras you decide to add, unforeseen problems and mishaps that have to be dealt with, and inflation. Next, subtract that from the home's likely market value after renovation, drawn from comparable real estate prices in the neighborhood.
Be tough with this estimate, which should include materials and labor - yours and other people's. First, add up the costs to renovate the property based on a thorough assessment of the condition of the house. Cost Analysis: Do the Mathįiguring out what you should pay when buying a fixer-upper starts with a simple equation. With that in mind, here’s what it takes to make the purchase of a fixer-upper pay off. Things to Consider When Buying a Fixer Upper "If people are unforgiving up front about assessing the costs of renovation, the value of the property and the neighborhood, and how much money they have, they can come out ahead and buy more house than they otherwise could ever afford," says Bradley Inman, CEO of, a real estate sales and information Web site. So before you take the plunge, read our home restoration tips to make sure you have a realistic idea of what you're getting into.
But buying a fixer-upper can be fraught with peril. Just think: You can snag a rundown place in a good neighborhood for way below market price, invest some time and money renovating it, and end up with a like-new house that's worth at least twice what you paid for it. For people who love old houses - and love to work on them - the notion of buying a fixer-upper can be irresistible.