Knowledge is essential when buying a fixer-upper
In today’s market, there are plenty of homes for sale that offer potential buyers an opportunity to invest in real estate at affordable prices. With so many homes for sale, buyers have a choice: a move-in ready home or a fixer-upper.
Current low prices assure buyers that either choice should result in attractive appreciation somewhere in the future. A good fixer-upper, purchased at a smart price, carries the added security of knowing that a little hard work now will result in positive equity regardless of the volatility in the real estate market.
“Know before you buy,” said Dennis Wiltgen, with Wilco Enterprises, LLP, 569 S. Westgate Drive. Wiltgen has been building and remodeling homes in the Grand Valley for almost 30 years. “Is it cosmetic or is it more than simply looks? Pay attention to the home inspection.”
Most buyers don’t have a home inspection until they’re ready to make an offer and get a loan for the property. That alone could be a mistake, especially if they fall in love with the house before learning what the home needs to bring it into the 21st Century.
“Look at the bones of the house, the basic structure and foundation,” Wiltgen said, adding that cracked walls are usually in indication of settling. “It’s hard to get the bones back into place. I wouldn’t recommend buying a house with a bad foundation.”
When doing a remodel that includes more than 50 percent of the home, Mesa County requires that the entire home be brought up to code. Building permits from the county are required on remodeling jobs whenever walls are moved or there are renovations to the plumbing and electrical systems in the house.
“It never hurts to have a permit because you get a second set of eyes on it,” Wiltgen said. “The building department is there to protect the homeowner, not the builder.”
When evaluating fixer-upper property, it’s important to know how much various fixes and renovations will cost. With the help of a savvy real estate agent and mortgage lender, it may be possible to get a loan that not only pays for the cost of the home, but also includes money for renovations.
If a buyer suspects that the home has major structural problems, it may be prudent to bring in a property inspector before he thinks about making an offer.
“It depends on the comfort level of the buyer,” says Ken Staton with A-1 Property Inspections. Buyers who want to fix and flip the house and who have the knowledge and expertise to handle major structural challenges may not call for a property inspection until the end of the process. Buyers who want to find a house with mostly cosmetic challenges may want to call an inspector earlier to make certain the necessary fixes are only skin deep.
A good property inspection includes an evaluation of the home’s appliances, including the furnace, the hot water heater and the cooling system. The inspection tests to make sure all systems are working (although it may not be possible to test an evaporative cooler in February), checks for any recall information and notes the age of the appliances.
A property inspection also covers the roof, the windows, the doors, the gutters, the amount and type of insulation in the home, the plumbing and the electrical system. Buyers who pay attention to the home inspection should have a good idea of what needs to be fixed first.
“It’s a good time to buy a rental right now,” said Ruth Kinnett with Dale Realty, who estimates that 65 percent of the bank-owned properties coming on the market require work. Some homes require very little fixing, perhaps just a bit of paint and cleaning. Others require major attention.
With prices that are usually negotiable, a fairly strong rental market and low interest rates, this is a golden opportunity for those who want to buy fixer-uppers and turn them into investment property. Those with the means to take advantage of the market are doing so.
“We’re seeing investors who are coming in and wanting fixer-uppers to use as rentals,” said Kinnett. “It’s going gangbusters right now.”
Whether buyers want to find a deal and an opportunity to put some sweat equity into their own home or find an investment property that gives them something to look forward to in retirement, the right fixer-upper may be good way to accomplish those goals.