Here are five myths people often assume about buying fixer-upper properties and the facts behind those myths.
Myth #1: You’ll make a killing by buying a home tens of thousands of dollars below its market value, administering a little TLC to it, and then selling it.
Fact: Home sellers price fixer-upper homes at a value that’s roughly equivalent to the amount of work that’s needed to make the necessary repairs. This means that adjusting the style of a fixer-upper or making some higher-end updates might make it difficult for you to recoup the money you put into it, because you may go overboard for what the market will bear. Sellers aren’t dumb—they won’t accept less money for their home so that you can make some updates to it. They’ll only price the home for however much it will take to make necessary repairs and bring the home back to its original condition.
Myth #2: You don’t need a home inspection if you’re buying a fixer-upper home.
Fact: This couldn’t be further from the truth. The home inspection is one of the most important contingencies we have, and it’s probably the best money you can spend during the escrow period. A home inspector will not only identify latent structural defects in the home that you can’t see with the naked eye, but they can also give you cost estimates for what it will take to fix those defects. Whether you intend to resell the home or live in it, this is important information to know.
Myth #3: It’s better to buy a fixer-upper in a less desirable neighborhood because you’ll spend less money and, therefore, potentially make more.
Fact: As the old adage goes, “location, location, location.” What the surrounding neighborhood or your fixer-upper looks like plays a big role in your ability to get a return on your investment once you resell it.
Myth #4: After you purchase a fixer-upper, by doing a little bit of work to it, you can double your money for it.
Fact: A home is only worth what the market will bear. Just because you make a few upgrades doesn’t mean you’ll automatically recoup what you put into those upgrades—they might not be what’s trendy in that neighborhood or area. The home’s neighborhood and what its surrounding amenities look like are more important factors than just buying at a lower price and hoping to make some money off of upgrades.
Myth #5: You can change the zoning of a house from a single-family unit to a multi-family unit.
Fact: This is easier said than done. Zoning laws and other HOA regulations can restrict a home’s occupants. They can also dictate the size of the home and your ability to change its features.
Remember to always look into the numbers before you invest in a property. Our website offers a free report on all the myths and facts of buying a fixer-upper and what the numbers might look like for certain areas, so you’re welcome to check that out in the meantime.
If you have any other questions about buying a fixer-upper or have any other real estate needs I can assist you with, don’t hesitate to reach out to me. I’d love to help you.