Should You Sell or Rent Your Remodeled Fixer-Upper
Over 80% of first-time homebuyers would consider buying a fixer-upper because they think it would be a worthy investment. However, it’s not always as glamorous as it’s portrayed, and there are a lot of details to consider, especially when you’re trying to decide whether to rent it out or sell it. HelpHouse presents some remodeling tips for those who are currently tackling a fixer-upper.
Remodeling Choices That Matter
The average price of a home is approximately $308,000, so buying a fixer-upper for anywhere that’s a little over 2,600 square feet for between $150,000 to $170,000 seems like a good deal. Apart from cosmetic changes, such as repainting and decluttering, home improvements that add to the asking price include:
- • Updating the plumbing and other bathroom fixtures
- • Cleaning up overgrown and patchy lawns
- • Improving kitchen appliances and layouts
- • Fencing the yard
These kinds of repairs are often much easier when you use a professional. Discuss your needs with a local contractor who is licensed and insured to ensure that these repairs are done properly and don’t interfere with underground utilities.
Do the Math First
Before you put down money for the home, it’s a good idea to do some math. Factors like the age of the house determine whether something can be changed or needs to be replaced altogether. In addition to that there are hidden costs, so it’s smart to budget about 5% of the buy price for repairs and maintenance before thinking about renovations.
Fixer-upper renovations cost anywhere from $18,000 to $77,000 with higher-end renovations costing over $100,000. The initial cost would be to immediately fix code violations. The rest would include redoing the major rooms along with the landscape. If foundation repairs are needed, that’s an additional cost.
Renting Your Fixer Upper
U.S. residential real estate prices are outpacing rents, which makes it necessary to buy cheaper. The advantage of buying a fixer-upper and renting it is that the mortgage on it will be less even if you have to refinance it. You would finally be able to rent the home and make money every month. In some cases, you may even be able to offer a lease-to-own option that can increase your cash flow.
Selling Your Fixer-Upper
For many, the idea of being a landlord is not appealing because of the long list of responsibilities and the 24-hour availability to handle any renter issues that come up. If you choose to use a property management company to collect rents and handle maintenance issues, that expense can eat away at your profits. In some cases, the less-than-ideal fixer-upper experience may push homeowners to sell and move on.
On average, these houses sell for about $300,000, which means that buyers can make a nice profit from the sale. The problem is higher prices and hungry investors are reducing fixer-upper inventory, so there’s no guarantee that you could find another house to buy, fix, and sell.
Recoup Your Investment
When it comes to working with fixer-uppers, you need to do an extensive cost analysis beforehand or you could be investing in a money pit. Buying or selling the remodeled home depends on how you see yourself throughout the process: landlord or investor.
When buying a fixer-upper, an experienced contractor can make all the difference. Meet your next contractor at the HelpHouse home improvement community.
About the Author
Sarah Velasquez and her husband are first time home buyers offering tips on their blog OurPerfectAbode.com to help renters find their “home sweet home”.