Should I Buy a Fixer Upper for my First Home? (tenants, square footage)
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Buy a lesser home and forget a fixer upper. If you don't have the money, you may go broke. It isn't cheap to fix up a home. Most people under estimate the prices it costs to do projects.
Watch some of these shows and they will show that you run into other unexpected problems that cost money.
We're still at it some 25 years later (income properties always take priority) and we still enjoy the journey.
We paid 80k for our train wreck in a hot market and the house was listed for 95k. We paid the house off in full in six years. We put in about 150k over the years.
At the bottom of the market it appraised for 325k and now is worth about 400k.
Ummmm. Not sure if this is the best example for a new DIY.
Doing the math...
80K HOUSE COST + 150K MATERIAL REPAIR COSTS=230k
Current value 400k-230=170k gross
Over 25 years = $6,800 gross return for two per annum or $3,400 annual gross per person.
Now, if you calculate how many hours you worked each year, working at your local Wal-Mart might have yielded a higher return.
Last edited by flowbe202; 12-26-2015 at 01:28 PM..
My wife and I bought a fixer-upper as my first home.
It was a foreclosure needing cleaning, some repairs, and a good amount of updating.
Would we do it again? Definitely
In fact, we plan on getting a fixer upper when we move.
DIY shows are good to watch to see the VERY general aspects of fixing up a show. However they don't show all of the little back issues and delays that spring up, only the more major ones that add some drama to the show
You just have to make sure you get a house that is what you are willing to put up with including some unforeseen issues. What this means... Are you willing to get a house with structural issues? Probably not in your first try. But one that may need updating the bathrooms and kitchen, including issues such as mold or minor electrical/plumbing issues when walls are exposed may be more feasible to you.
Also, settle on a house that you can live with in its current state. If its just two of you, you can get away living in a 2 bathroom house that one bathroom is just fine while the other require major updating.
We were able to get the house for much less than we could have afforded in our area, even without the updates. And some of the projects have been fun to work together (obviously others quite the opposite) and we get to feel like we somewhat customized the house to what we want.
One great way to earn free experience and help a good cause... Volunteer for such things as Habitat for Humanity and other charitable organizations that build/update houses. You normally start off doing very small/minor assistance, but after a while you can look over how some of the trades do their jobs. I learned a great deal this way long before many of these now trendy DIY shows existed. With an experienced tradesman overseeing, I leaned drywall installation (including mudding/taping/finishing), tiling, plumbing and minor electrical work.
As always, make sure you get a thorough inspection
There is one home in particular that is a great size and location, but in need of serious cosmetic work, moderate landscaping, and minor updating. ...
EDIT: ... However, it only needs the floors replaced, rooms painted, and a thorough deep clean initially to be livable, and we can do the other repairs over time.
If I remember your other posts correctly, you would actually have a shorter commute if you buy this house. And your wife is on board with buying a fixer-upper.
If this house really just needs to be cleaned and painted to be able to live in it, and only needs cosmetic work and minor updating, and you love the space and it's a shorter commute, I say jump on it!
I've purchased fixer-uppers all of my life. I've also rented a lot. The way I look at a fixer-upper, is the way a renter looks at one. If I buy it, I don't have to worry about getting kicked out, as long as I make my mortgage and tax payments. And my payments won't go up (never go for an adjustable mortgage). I can get multiple pets. I can paint the place the way I want.
And guess what? Unless something really crazy happens, you even get your rent money back if/when you sell it! And sometimes, you even get all your fixing up money back and sometimes you even make a profit on top of that.
And, if you were willing to buy it, someone else will be too.
I never did any work I couldn't handle, which was most of it. And I've always been someone who had to watch every dime. You just first get the place set up so you can function in it - a decent place to cook and sleep, where you can stay warm or cool. If that means closing off the rest of the house and living in the kitchen for a while, so be it. Attitude is everything.
You don't have to learn how to do stuff if you don't want to. Just save up and hire people when you're ready.
Even if you just move into it and end up selling it without doing anything to it in the next 3 years other than cleaning and painting it, you'll be ahead, in my experience. Because you're not buying something you can't afford.
I wouldn't let your expectations ruin balance in your life. Include date nights and weekends off in your schedule. You will hate the house if you try to hurry and just work, commute, and come home and work.
Heck, if you're expecting a big pay raise in 3 years, you could always just put off major improvements until then. At any rate, don't forget to relax. If your wife knows how to do something and wants your help, let her be the boss and tell you what to do. Otherwise, just pay people when you are ready for the next project.
If you ask around, you should find a good contractor. I once called the building department and asked the inspector who he would hire LOL. Got a great reference.
There is a difference between a fixer-upper and home that needs updating.
You can live with shabby carpets and outdated bathroom fixtures.
Whereas a home with an old furnace and outdated wiring is another matter.
Foundation, roof, plumbing, electrical ... all require knowledge and skills that the OP is clear he does not have at this point but will undoubtedly will become increasingly familiar with over years of home ownership.
So find a home that is structurally sound but cosmetically a disaster. Lot of first time homeowners got their start this way.
1. An "hour" away from work is a huge mistake.
2. Location matters. Can change the house, but can't change location.
3. Find a contractor, take him to the house, and have him price out those repairs then add $5000 over that cost; a normal remodel always goes over budget, a fixer even more so!
4. Take a break from house hunting. You're becoming obsessed & that's when mistakes happen.
5. Save more, and up the budget if you're not handy.
6. Over time, owning a home costs a lot more than rent. The purchase price is only the beginning of never ending costs! Don't fall for the propaganda.
7. Have you checked insurance rates? Closing costs? Property Taxes? HOAs?
You can save a lot of money by buying smaller. The 1100 square foot house? Why not? There's still just two of you, and you said this would be your first foray into house buying. You can do a lot to a house, but you can't put it somewhere else; so if the location is good, think hard about this one.
If it truly only needs cosmetic work (get a good house inspector, and not one that the realtor recommends, then you will know if darker problems lurk in there,) and if not, you can do the cosmetic work and make money when you sell the house.
Most posters on here have offered solid advice. I would not go into a big rehab job as my first house purchase. You will have things to do anyway, believe me!
A final note: this is the lull season for house sales. In the south, plenty of houses will come on sale in February, in the north, in March. You might want to wait. OR, if this house you like has been on the market for months, they may be open to a big price reduction.
Have you thought about buying the smaller house that is ready to go with the intention to use it for rental income when you are ready to buy your forever home?
I have a 1960's home that we have gutted 3/4 of so far and I have lived in it for 13 years. I also have an office built in 1895 that I am in the process of restoring. All I can say is that if you don't like fixing things, don't buy a fixer. It is much harder than it seems on shows, and drywall is not easy to make look good. I gained a whole new respect for drywallers that can tape and texture them to look good.
If you do decide to go the fixer route see if you can find a local contractor to be a remodel coach. I know we have one here. He will walk you through step by step what you need to do for your project. He will show you how to cut tile, lay flooring, etc. One of the worst things homeowners can do is devalue their property by doing home de-provement jobs. I can't tell you how many homes I walked in that said "updated" and the buyer and I are just thinking of all the gutting that has to be done.
Have you thought about buying the smaller house that is ready to go with the intention to use it for rental income when you are ready to buy your forever home?
I have a 1960's home that we have gutted 3/4 of so far and I have lived in it for 13 years. I also have an office built in 1895 that I am in the process of restoring. All I can say is that if you don't like fixing things, don't buy a fixer. It is much harder than it seems on shows, and drywall is not easy to make look good. I gained a whole new respect for drywallers that can tape and texture them to look good.
If you do decide to go the fixer route see if you can find a local contractor to be a remodel coach. I know we have one here. He will walk you through step by step what you need to do for your project. He will show you how to cut tile, lay flooring, etc. One of the worst things homeowners can do is devalue their property by doing home de-provement jobs. I can't tell you how many homes I walked in that said "updated" and the buyer and I are just thinking of all the gutting that has to be done.
Yes, but there is cost associated with a "contractor coach!" He's not going to come for free!
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