Before you make the decision to purchase a fixer-upper home, you should make sure you do your homework so you understand these types of homes. While fixer-uppers can often present a good deal, there are some important points to be aware of so you understand the realities.
Myth: I can make a ton of money in the market by purchasing a fixer-upper, for far less money, and then selling it for full price or more.
Fact: Most homeowners looking to sell their fixer-upper home understand that they will have to list their home at a price that reflects the cost involved in restoring the home to its original condition. The asking price of a fixer upper is usually calculated so that the savings represented by the lower than average market price is roughly equal to the amount of money that a buyer could expect to spend on any necessary renovations.
Myth: if I’m buying a fixer-upper home, I don’t need to bother with the added cost of a home inspection since I already know what I’m getting into.
Fact: a home inspection should always be included in a real estate agreement, and likely even more important in the purchase of a fixer-upper. Structural defects are normally not visible to the untrained eye, yet will cost much more to repair than the obvious cosmetic fix-ups. Most licensed home inspectors will not only detail the defects that they uncover, but can also give you a good idea of the costs involved in fixing them.
Myth: It’s better to pay less for a fixer-upper in an undesirable area, than to pay more for one in a ‘better’ neighbourhood.
Fact: most of us have heard the quote, “the three most important things to look for when buying a home are: location….location…and location!” While this is obviously meant to be funny, and is a somewhat oversimplified rule of home buying, it does drive home the point of how important it is to consider where you will buy your home.
Myth: once the house is renovated and ‘fixed up’, I can turn around and sell it for double what I paid.
Fact: a home will always only sell for what the market will sustain. What this means is that no matter how many upgrades were made, or how much money has been invested in the upgrades, a home will only sell for what the majority of homebuyers are willing to pay. Factors to consider when calculating your possible return on investment: location, neighbours and surroundings.
Myth: I can make more money by turning a single-family home into a multi-family dwelling.
Fact: while sometimes this can be true, it’s not always a possible option. Most cities have strict zoning laws in regards to that type of housing.
Once you’ve taken into the pros and cons of purchasing a fixer-upper home, always talk numbers and figure out the costs associated with the purchase.
