Key Nuggets to Remember
- House flipping looks like a breeze on TV, but in reality, it’s a marathon of time and money.
- Plan your budget with wiggle room, brace yourself for curveballs, and be honest about your DIY limits.
- Several financing options let you bundle your home purchase and renovation expenses into one mortgage.
Back in 2009, Breanna Reish set out to buy a home without much extra cash lying around, steering her gaze toward foreclosures. She stumbled across an aging property, nearly gutted to its bare bones, but that didn’t faze her.
“What we ended up with was basically a hollowed-out shell, crying out for work. Yet we managed to haggle the price down to just $27,000,” Reish recalls. She’s the brains behind Wealth of Confidence, a financial planning firm in Riverside, California.
Though it took sweat, tears, and lengthy hours, Reish says her gamble paid off. “We shelled out way less than we’d ever pay to live anywhere else,” she notes. Since then, the home’s value has climbed — a nice cherry on top.
What’s a Fixer-Upper, Anyway?
Usually, a fixer-upper is a dated property that’s lost its charm or modern flair, begging for serious TLC. These homes often sit in coveted neighborhoods or close to good schools, which ups their resale potential.
Because these places demand hefty repairs, they’re often priced to move — like Reish’s find. But watch out: renovation costs can balloon unexpectedly, turning a great deal into a financial sinkhole.
Buying a fixer-upper isn’t for wimps. Many dream of crafting their perfect home in a prime location, but expect a minefield of money and logistics hurdles. Yet, when the dust settles, the payoff can be sweeter than you imagined.
Who’s Cut Out for a Fixer-Upper?
- Homebuyers strapped for cash but ready to roll up their sleeves and invest sweat equity.
- Real estate investors hunting bargains with potential for profit, keyed into location and upgrade value.
- Buyers craving a home tailored from scratch — fixer-uppers offer a blank slate for layouts, fixtures, and style.
Smart Moves When Snagging a Fixer-Upper
Thinking about flipping a fixer-upper? Here are some game-changing tips worth chewing over.
1. Location, Location, Location
You can overhaul a house ‘til the cows come home, but the neighborhood’s set in stone. “An ideal fixer-upper nestles in a spot that makes sense,” says Atlanta’s real estate pro Donovan Reynolds. Putting elbow grease into a run-down place in a prime area means you get to “live where you thought you couldn’t afford.”
Want to sniff out fixer-uppers? Take drives through your dream neighborhoods, eyeballing homes with peeling paint or sagging porches. Online, watch for listings that linger or head to auction. If you can swing the rehab, these properties might just reward you with juicy returns.
Reynolds also advises sizing up if your planned upgrades gel with the neighborhood vibe. “Think carefully about whether your renos jive with local standards.”
2. Pad Your Budget for Surprise Costs
Fixer-uppers demand serious planning. Renovations frequently bleed more time and cash than expected. Reynolds recommends tacking on an extra 20% cushion for the unforeseen — because even small surprises can run you $10,000 or more.
Contractors can be swamped, so booking pros well ahead is smart. Vet their track records online — punctuality, sticking to budget, finishing on time all count. Lock in contracts with clauses that help dodge delays.
From HGTV’s “Good Bones,” Mina Starsiak Hawk stresses the importance of mindset: “Prepare for curveballs like permit hold-ups or weather sidelining work. Treat fixer-uppers like an adventure with inevitable hiccups.”
Also, if you’re eyeing a foreclosure, remember the home could still have occupants. Evictions can drain time and pockets.
3. Brace for Renovations to Shake Up Your Daily Grind
Supply chain headaches, bad weather, and random setbacks make delays a near guarantee. Ask yourself: will you camp out during construction? If you work remotely or have tots at home, juggling chaos for months may not fly.
“They say the real test of any relationship is surviving a renovation together,” quips Karen E. Laine, Mina’s mom and “Good Bones” co-star. “Think about living without essentials like a working kitchen or bathroom while you fix the place up.”
If the noise and mess aren’t your jam, consider spreading projects out to keep disruption minimal.
4. Make That Home Inspection Your Best Friend
Before sealing the deal, bring in a licensed home inspector to sniff out hidden problems that could blow your budget or derail your plans.
“Focus on the house’s bones — foundation, crawlspaces, insulation, and structural integrity,” warns Hawk. “A weak foundation can turn your dream into a money pit.”
Don’t sweat surface flaws like chipped paint or busted windows; those are fixable. Zero in on major systems to forecast repair costs and avoid nasty surprises. Key areas to scrutinize include:
- Electrical, plumbing, and sewer networks
- Foundation stability
- Heating, ventilation, and air conditioning (HVAC) setup
- Roof condition
- Environmental concerns
Specialized Inspections: When and Why?
Depending on the property’s state, specialized checks can uncover more subtle issues:
- Pest inspections: Damage from critters like termites can be a deal-breaker; these assessments gauge if repairs or treatments are needed.
- Thermal imaging: Using infrared technology, inspectors detect hidden heat loss, air leaks, moisture troubles, and electrical oddities invisible to the naked eye.
5. Lock Down Financing That Works for Renovations
Fixing up a house isn’t cheap — finding the right financial tools is crucial. Various loan programs mix your purchase and rehab costs into a single mortgage.
The HomeStyle Renovation loan is a flexible option, allowing up to 97% loan-to-value (LTV) and funding renovation expenses covering as much as 75% of the home’s value post-renovation (calculated either as 75% of purchase price plus remodel costs or 75% of the finished appraisal, whichever’s lower). A credit score above 620 boosts your odds of approval.
Funds are held in escrow, paying contractors directly to keep things on the up and up. This loan supports everything from reroofing and major landscaping to building accessory dwelling units — covering a broad spectrum of renovation needs.
Freddie Mac CHOICERenovation Loan
This program bundles remodeling fees with your mortgage through a single closing, available in fixed or adjustable rates.
The CHOICEReno eXPress variant targets smaller projects like door or window swaps, ideal for less extensive makeovers.
Minimal credit requirements and lower down payments make these loans accessible to a wider range of buyers compared to traditional mortgages.
USDA Renovation Loans
Two USDA options fold purchase and improvement costs into one loan for rural properties:
| Single Family Housing Direct Loans | Known as Section 502 Direct Loans, these help eligible buyers afford homes in rural spots, with payment assistance funded by USDA. |
| Single Family Housing Guaranteed Loan Program | This federally-backed loan, guaranteed up to 90% by USDA, assists income-qualified buyers via private lenders in rural areas. |
VA Renovation Loan
Veterans and their spouses may tap into a no-down-payment renovation loan through the Department of Veterans Affairs. It lets you wrap repair expenses into your mortgage but excludes major structural work and comes with specific caps.
Final Thoughts
No fixer-upper is flawless — it’s about finding the one that fits your wallet, timeline, and way of life. Every home has quirks and hurdles, so get real about whether you’re ready to dive into such a hefty commitment before signing on the dotted line.
Additional contributions by Sarah Li-Cain