Before you decide a fixer upper is your ideal next house to buy, you need to answer a few questions to see if it’s really a suitable option.
Some of these questions may seem obvious but they aren’t always thought about.
Do you like old or new homes?
There are big differences between the two and more often than not, if you are getting a fixer upper it will be an older home. Older homes come with their own set of quirkiness and problems whether they’re a fixer upper or not.
Are you thinking about a fixer upper as it may be cheaper?
Yes initially a fixer upper can be cheaper, but you need to factor in all the costs of renovation and how you are going to fund these projects. Will you be doing all the work yourself to save money or are you thinking of bringing in a professional. If you are thinking of bringing in a professional have you had estimates done for cost and time to get a true sense of overall costs?
Do you like taking on big projects and do you have the patience?
Sounds like a no brainer to ask this, but depending on the amount of work that needs to be done you could be locked into these projects for a while. To start you can have much enthusiasm for new projects, but as the time goes on, enthusiasm will wane and you really need to be pro DIY projects to dig in and get the job done. Also project rarely go according to plan and can often take much longer than you first expect. Will you be able to factor in additional time if need be?
Will the property be habitable whilst the work is being done?
If you can’t live in the property, you will have to factor in additional expenses of renting whilst your house is completed, unless of course you have generous parents you can move in with while the work is being done.
What will the property be for?
Are you buying a fixer upper for you and your family to live in for a few years? Is it to turn a quick profit and to sell on as soon as the work is complete? Is it to get your foot in the landlord market? Depending on what you want the house to be used for will factor a lot in your renovations. You may be creative and love a home’s quirkiness, but if you are selling the property on or renting it out, not everyone will have the same taste as you. In this case you should keep the property as neutral as possible to help with a quicker resale or to find tenants.
If you answered yes to most of the questions above then you may be ready to take on a ‘fixer upper’.
Before you decide on a property you want, take a good look at your finances. How much to have to spend on the house and how much will be left over for the renovations? Will you be paying for the renovations out of your own pocket, or will you want to take out a bigger mortgage against the property to fund some of the improvements. A credit card with 0% on purchases may be cheaper for the smaller, cheaper items than adding those to the overall costs funded by the mortgage.
Getting a mortgage for a fixer upper can be trickier than getting a one for a ‘ready to move in’ home. Often fixer uppers can be seen as a riskier investment for the banks. The banks need to weigh up, whether or not they will be able to recover their initial investment, your mortgage, if you run out of money during the renovations, or f there is some other reason why you can’t finish the project.
SoSmart Money has teamed up with Turnkey mortgages to help you find the right mortgage for you, no matter your circumstances. You can check out what mortgages are available for you and the basic rates. You can then request for an advisor to call you back at a time that suits you to run through all your options in detail.
Once you have assessed you finances and you have found a possible mortgage you will know roughly what you have to spend on the property. Remember renovation costs especially for the big projects can spiral, so make sure you have a budget for unforeseen costs and that there is enough in that pot to cover anything that it might need to.
Finding a property
You know how much you want to spend; now you need to find that property you want to fix up. Don’t just think about the property, the area is also a big selling point especially if you are not planning to live in the house and you want to either rent it or sell it to turn a profit. Depending on who you think your cliental will be will depend what you may look for in the area. Young professionals may want a vibrant night and shopping life, whereas families will be looking at the quality of schools in the area.
Also different postcodes will come at different prices. Just a few streets down the road could make a £30,000 difference. Also look at the value of other properties in the area. There is no point in having grand plans for a property if you are going to price it out of its postcode. If you are looking at turning it into a profit, add up the costs of the refurbishments (taking into consideration your time and any unforeseen circumstances) with the cost of the house and weigh it up against the prices of properties within your chosen area. That way you will see if there is a profit to be made.
To know how much it will costs to ‘do up’ a house it is best to bring in the professionals. Whether you end up using them or not, it will help you to understand roughly how much you will need, especially if this is the first house you decide to fix up. You never know a professional may surprise you with their prices. It may be cheaper for you to do the work, as you aren’t paying for labour, but you should always factor in your costs. If you will earn more going to work than it will cost to pay a labourer it might be better to bring in a labourer. Also labourers can often buy in bulk which will allow them to buy the materials cheaper than you can.
You can look for rated tradesmen on Welcome Home; they have teamed up with ratedpeople.com to provide you with easy access to tradesmen that have been rated well by previous employers.
How it works:
1. Post your job for free
2. Get up to three quotes
3. Review ratings to select your tradesman
4. Rate your tradesman to help others
So you have found a property, you know the amount of work and cost involved in getting it ‘ship shape’ and you are ready for it and raring to go. All that is left is to finalise your mortgage for your chosen property.
You can compare mortgages online to find the best quotes in the market. Simply add in the amount you want to borrow, the cost of the property and how long you’d like to pay it back. We work with Turnkey mortgages to help bring you the top mortgages under the different mortgage types for your query. You can then request that an adviser at turnkey mortgages will give you a call back to independently discuss your options further, or you can use the phone number to call straight through to them for advice.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media or the Mitchell Farrar Group.