If you're a first time home buyer, or if you're trying to buy up into a higher priced neighborhood, or if you're contemplating doing a "flip", then buying a fixer-upper might be a good idea for you. The trick is to be completely realistic in your expectations of how much spare time you can devote to the project of home renovation, how much additional money it will cost above and beyond the cost of the house, the amount of skills and experience you have in various home repairs, the level of repairs or upgrades needed, how long you plan on living in the home, and your tolerance for living under duress.
First and foremost, if it's truly a "fixer" home, it should be priced as such. If it's advertised as a fixer or needing TLC, then the home should come with a discounted price. Use your head and not your heart. Do your research and check the recent comparable sales in the neighborhood. You can easily find these on Realtor.com or Zillow. Find out what upgrades the comps have to determine how much money you should reasonably invest in the home without going over fair market value. If you suddenly lost your job, or got a job transfer, you'd want to be able to sell your home at the same price for what you put into it; or hopefully, at a profit.
Some improvements are simple: new paint, freshening up the landscaping, a few new appliances, new hardware on the cabinets and the house can have a whole new look. At other times the home may need a complete kitchen or bath remodel and require the help of professionals. Unless you know what you're doing, or you have a friend who's a licensed plumber or electrician, I would strongly advise paying the extra money and know that you're getting a quality job from a professional.
Based on information compiled from the National Association of Realtors, here are some of the best improvements for return on your investment:
1. New Roof - It may not be glamorous - but you'll be glad you did it when you realize the savings in heating bills, dry rot and roof leaks. Also, if you sell you can recoup up to 105% of the cost!
2. Hardwood Floors - If the house you buy already has them, then refinish them. If it doesn't, seriously consider putting them in. The cost of hardwood over carpet is slightly higher, but you'll love the difference and down the road, your buyer will too!
3. Energy Efficient Appliances/Solar Heating/Insulation - You will be so glad that you include these items in your budget, especially during the extra cold months or very hot summers. There may be rebates or tax credits as well. When it comes time to sell, you will get top dollar; buyers look for and understand what these items signify.
4. Remodeled Kitchen - This is a big ticket improvement, but it's well worth the work, given how much time we spend in our kitchens. Use neutral color palettes that don't go out of style and you won't put yourself in the bind of having to remodel in 5 years.
Taking all of this into consideration, and your lifestyle, think realistically about how long your remodel is going to take. There are always unforeseen issues that crop up in any project, so plan on them. What is your stress level? Do you have a sense of humor? There will be times when you will need to stay calm and laughter really is the best medicine! Remodeling a bathroom or kitchen can take several weeks. Set a budget and stick to it. Set a start and finish date; you don't want to be living in a house that's never finished!
If you plan wisely, not only will you have the house of your dreams, you'll have sweat equity also, and that my friends can be cash in your pocket down the road.