5 Things to Consider Before Committing to a “Fixer-Upper”
“Needs a little love,” “project home,” and “fixer-upper” are common real estate terms but what are the 5 things you should consider before committing to a Fixer-upper? With all the recent renovation in our market, topped with the viewership for ‘flipping’ shows in the media, most people know what those terms really mean. In our market, typically it means, a bit dated. Or looks like Grandma’s house. The term is used in listings to help manage buyer’s expectations and to entice energetic and industrious homebuyers who are looking for a unique and rewarding challenge. Sweat equity is a good way to turn learnings into income. However, are you really up for the demands that come with this kind of home purchase?
If you’re reading this, chances are you either have your sights set on a home that needs a little help to get back in order, financially you are willing to personalize a home to get what you really want, you are on a fix and sell track for the next couple of years. As exciting as this proposition is, it’s important to understand what level of fixer up best suits your skills and wallet at the present time.
Investing in a fixer-upper isn’t always a simple affair but there is great upside if you do it wisely. Thankfully, there’s plenty you can do before ownership transfers to you to ensure that everything goes as smoothly as possible as you tap into the potential found within these project houses.
1. Get Your Math in Order
Know your math. As obvious as it may seem, the truth of the matter is that many homebuyers get excited but are only working with ballpark figures. Get quotes! Know the norms for your area for certain things and stick to your budget. Even though guesswork and estimations can suffice for certain items, ensure with larger ticket items you get a couple of quotes. Substitutes for hard and real numbers can leave you short and that may increase the time it takes to complete the projects scheduled.
Thoroughness is the name of the game when running the numbers. Obviously, spending the time and effort to include every expense – inspections, closing costs, and materials is key.
Understand the Difference Between Fun and Work
Experienced Fixer-Uppers understand the difference between fun and work in terms of project requirements. While you might pride yourself as a “do-it-yourself” kind of person, major structural or grading or additions are outside the scope of most do-it-yourself types and could prove costly.
2. Break down Your Project Needs
This Old House magazine’s Jeffery Rothfeder recommends you break down your projects from a variety of angles. First off, figure out what you can already do yourself. Ask yourself: Do I have the experience at xxx to do a quality job? Be realistic about items you haven’t tackled before. You don’t know what you don’t know. Doing renos in the wrong order can be a massive mistake financially. Next, start getting references for contractors and professionals who are capable of handling the job. I strongly recommend you do this via great referrals from people who have experience with those contractors or trades personally. Don’t do the ‘my cousing Joey’s friend’s brother thing. This is an expensive mistake. Use a referral by someone who actually hired them!)
Some Realtors are a great source for all things home-related. We keep a book called “Around the House” and it’s all our top-level contractors, handymen, service suppliers etc. We’ve kept this list up for 25 years. We also take in referrals from our clients who had an outstanding experience with a service provider in the last year. We only include trades or companies or service providers with whom our clients would rate 8/10 or higher. We check out their work too. So should YOU! Ask to see their work and not just photos. Visit a job site and ask questions.
3. Don’t Be Afraid to Bring in an Expert Opinion
As many of you have heard me say, there is a big difference between a decorator/designer and an Interior Designer. Interior Designers have done typically 4 intensive years at University to know what they are doing. A designer or decorator is just anyone who calls themselves a “designer”. No qualifications needed. Know the difference.
Our first recommendation for any fixer-upper job is to get an Interior Designer in on the project. Interior Designers understand and do construction drawings, have trade relationships and tremendous foresight for what you’re trying to accomplish. They also have spent hundred if not thousands of hours sourcing great products and materials. The trouble with a Home Depot reno is that it looks like a Home Depot reno by most early flippers. GIving the home a bit more personality (on budget) and get yourself exposed to trade-specific brands. Interior Designers are not always more expensive (common misconception). They might save you money, time and help deliver exactly what you envision and with higher quality.
After establishing how much help you need and the trades involved, it’s time to figure out the best order to roll out the project. You don’t want to be ripping things out you’ve already installed in order to redo something important and necessary. This mistake is a big budget buster and deflates your enthusiasm. A needless emotional exercise. A designer and great contractor will help you keep first things first as you progress. Our September issue of THE NEST magazine has a good interview with Designer Evelyn Eschun, Interior Designer covering common misconceptions of working with an Interior Designer.
Going it alone
If you are convinced you can handle all of the associated projects on your own, Go for it! Just remember it’s never a bad idea to spring for a second, professional opinion. It’s tempting to rely on your own limited personal experience – or unlicensed friends just be cautious. Discussions are free or cheap and redoing items is expensive. Home inspectors, interior designers, and other bonafide specialists have years of time on the job and the training needed to spot what the average homebuyer might miss. Don’t be afraid to seek out the right type of help, up front. You could also get help in stages, or just for parts of the project that are beyond your personal scope and experience.
4. Curb Appeal
What we see a lot of…is the flipper takes into account the interior budget and completely forgets about the curb appeal of the home. It’s highly overlooked by the average renovator. It’s important to remember curb appeal is highly regarded by a buyer. Buyers want a home they can be proud to show friends and family. Freshening up the exterior with paint, shutters, fencing or even simple landscaping goes a long way to improving the value and marketability of a home. Sometimes all it takes is a more contemporary front door. Other simple items to consider are: wash the deck or brick with a power washer, or give the asphalt driveway a new black topcoat. Contemporary Garage doors add tremendous appeal and have the highest ROI for flipping. These items are simple to do and don’t cost a lot of money but can make a huge difference.
5. Review Your Plan Before Signing on the Dotted Line
Now is the time, renovations begin…to ensure your final plan is in line with the values in the neighbourhood are. If the other homes are reasonably updated and selling for $$700,000 +/- $10,000 then don’t embark on renovations that take this home to $900,000. That’s a tough sell, if the other local homes don’t support that price. Get a qualified and experienced realtor to review the plans and go over the marketability of the final outcome.
Be methodical, take your time with the steps and stages and do it well over doing it FAST.
Permits are a good thing
Get permits, use the right materials, and keep in mind many buyers can request permit information and verification before offering if you’re planning on a FLIP. It’s becoming more and more normal for this to happen. Just know, that many homes that are a bit dated, just need a few finish changes to make them feel like a whole new home. There are always a few in the market, just ensure you know your numbers.
Go ahead, make homeownership a possibility. A diamond in the rough is often a great alternative, especially if it’s in a highly sought after neighbourhood, Like Kerr Village Real Estate in Oakville or one that’s becoming a destination (through upgrading turnover). We cover 13 different villages in the near 905 and there is likely an affordable option available for you to get started with.