Buying property is a costly investment that not everyone is willing to make. It can involve more than just money, as some buildings need serious renovations to make them habitable. This might sound like a huge deal breaker, but in the long run it can provide benefits that are not visible at first glance.
The comfort that comes with having your own house can make all its troubles feel less significant.
Is it worth buying a house that needs renovation?
Whether or not it’s worth buying a fixer-upper depends on many factors, including your budget, the overall condition of the property, the estimated costs of renovating it, and of course your very own vision of how you want your dream house to look.
Homebuyers have different opinions about investing in houses that need more work and money. For some, it’s a loss of money. But for others, such opportunities might be a gold mine. If your goal is to flip the house, then buying such property and renovating it might prove beneficial. For creative types, this could be a golden opportunity to build the home you always dreamed of; by investing money and effort, you turn a rusty ol’ house into a splendid habitat.
The benefits of buying a house that needs more work
For a lot of potential buyers, getting a property that requires more work is counter-intuitive, as it means investing more money. The thing with all houses is that they’re never what they seem. Plumbing, floors, electrical grid, and roofing are just some of the hidden costs when it comes to renovation. Things can get really messy if your HVAC needs repair. Despite any potential shortcomings, buying a house that needs repairs can be beneficial.
Low price is the most obvious benefit of buying a house that is not in mint condition. Unless you’re buying a Fixer-Upper or a Foreclosure property, the price can and should be negotiated (unless it fits your budget). But even Fixer-Uppers or Foreclosure homes can be negotiated depending on the condition of the property and if they are in a hurry to sell. These types of houses most often are in need of repair, thus the reason for the lower price. Depending on the degree of repair work required, you might have room to negotiate further.
It’s always a good idea to track all your expenses in some sort of spreadsheet (here is a good example you can download for free) to make sure you don’t go over budget when buying a property. These expenses include the down payment, closing costs, monthly housing costs, and monthly mortgage payment.
Dream come true
Before you get discouraged from the not-so-impressive look of your soon-to-be home, think of what you will get once you’re done fixing it. A bit of work and money will go a long way when it’s done. You will have the house you imagined, according to your taste. Another factor that might not be so apparent, but is nonetheless important, is the additional value that your repairs will add to the house. Renovating vital spaces like the kitchen, bathroom, and living rooms will increase exponentially the market value of your home.
Flip for profit
Certain houses offer a great opportunity to make a profit. Some Fixer-Uppers might require very little work like a fresh coat of paint, floor cleaning, or minor plumbing repairs. They usually make more money once flipped. That’s why many redevelopers are on the lookout for such properties.
Little helping hand
In the perfect scenario, you find a house that requires minimal repairs, you negotiate a good deal, and you buy it. However, not everyone can afford to pay outright for a new home. In such cases, you might consider applying for a Home Improvement loan. That’s a loan granted by banks to people willing to buy old and/or damaged homes. It will aid you in restoring your new home, but there are a few things to consider here. First, are you eligible to receive the loan? Second, do you really need a loan? If you’re eyeing a near-mint condition property, applying for a federal loan might not be such a good idea; it would add more to your mortgage rate. Besides that, applying for such a loan is a timely procedure and not every house is eligible.
Pay more to get more
The decision to buy a cheaper real estate property is the first of many that future homeowners need to make. More affordable houses usually come with higher repair and maintenance costs. Adjusting your expectations accordingly and making sure you stay within the budget will make the buying process more bearable.
Going over budget
Renovating a house to increase its market value is a great thing, but it can add up to your budget. If you have a limited budget, you might have problems finishing up the work, because you went over budget. This could make your situation worse, especially if you live in a rented house for the duration of the renovation. While sometimes you might be willing to stretch your budget to achieve a better outcome, that can sometimes go way out of hand.
Risk of adding no real value
If you spend £150,000 renovating your property, this doesn’t mean that you will be automatically adding £150,000 to its value. Don’t spend it when it’s not necessary. There have been instances where owners have spent huge amounts of money transforming their homes, but the final value reflects only the demand for the area.
Sometimes you have to accept that you may be buying an expensive kitchen for your own enjoyment while you’re living in the property, not because it will be adding value. There is a balance to strike between what people are willing to spend when you come to sell and what the demand is – there will always be a ceiling. But if you work within a sensible budget, you are likely to see a return on your spend and then some.
The article was written by Christian Antonoff. Christian lends his writing skills to Independent Fashion Bloggers. He has worked as a journalist and is passionate about overpriced speciality coffee. In his spare time, he loves to attend exhibitions of art he doesn’t get.