Have you ever come across a fixer-upper house that you know is a steal and think how much money you could make on it? Before you jump on that so-called ‘good deal’, you should know what the true cost of the home is after you are done with it.
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The home is on the market for such a low price likely because there is a lot wrong with it. While you can likely fix it up and sell it for a lot more, you may not make as much as you thought on the home. You have to consider the cost of fixing the home up to see if you will still make the profit you thought you’d make.
Just how do you estimate what the cost will be? We help you figure it out below.
Base Your Estimate on What You Know
First, consider what you know about the house. You probably know its age. Older homes typically have more things wrong with them. This could mean they will cost more money to renovate. Oftentimes the plumbing or electrical systems are so old that they have to be completely redone, which means a lot of money, labor, and time.
What did you notice upon first glance when walking through the home? What were the things that you would most want to change? Are they minor things like changing the paint color or patching walls? Were they something major, such as knocking down walls, replacing the roof, or redoing the flooring? Knowing how much work you might have to do without getting a professional opinion can give you a good starting point.
Call a Home Inspector
The thought of spending money on a home that you don’t own yet may not seem like something you want to do, but it’s important. A home inspector will tell you in detail what is wrong with the home. He goes beyond what you can see with the naked eye. He does an in-depth evaluation of all areas of the home. He then provides you with this detailed report to help you understand what is wrong with the home and what you may have to do to even bring it up to code.
Once you know what the inspector says, you can get a better grasp on the changes you’ll have to make. You can then decide if they are DIY repairs or if you’ll have to hire a professional.
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Get Estimates From Contractors
If you have to bring in the experts to do the work, you’ll need to get estimates; doing this ahead of time can give you a ballpark figure of where you’ll be. If the repairs seem way out of your budget and will eat up your profits, you’ll know that the home may be more hassle than it’s worth.
If you think you might do the work yourself, get a good estimate of the cost of the materials. Also, figure in the time you’ll spend on the project. Your time is money too – if you spend all of your time fixing up the home and ignoring other things in your life, you’ll pay the price in other areas.
Know the Resale Value in the Area
It’s also a good idea to talk to your realtor about the potential resale price of the home after you renovate it. Does the realtor thing it’s a good area for this type of home? Will you see a return on your investment or will you just break even?
Your real estate agent should have a good idea of the home’s potential and what the prices are like in the area. He/she will know if sellers have a hard time getting rid of their homes or if it’s a hot area. Even though holding onto the home after it’s renovated won’t cost you much, it’s still a burden on your shoulders that you probably want to eliminate. If the home will sit on the market too long, it could become a financial burden.
Take a long, hard look at the potential of a fixer-upper before you buy it. Don’t just assume that you’ll be able to turn a profit on it. Find out the real deal with the home before you move forward. The more information you have before you buy the home the better off you’ll be.
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