Thinking about a "Fixer - Upper"?

If you’re looking to buy or sell in the Merrimack Valley and Southern New Hampshire, REALTOR Trevor Gearin is your go-to real estate expert, for "GEARIN-TEED" RESULTS, every time. Team up with Trevor today by calling (978) 590-6793!

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Thinking About a Fixer-Upper Home?

There are so many things to consider when buying your first home. And if you’re considering purchasing a property that needs some repairs, there are particular things to keep in mind. Whether you plan to live in the house or rent it to others, Realtor Trevor Gearin of CENTURY 21 McLennan & Company outlines important steps to take to ensure the project can be done at a reasonable cost.

Establish Your Budget First

Before you begin house shopping, determine what you can afford to spend on the property and any remodeling or upgrades. A renovation loan or a rehab loan might be ideal for you in that it can be used to finance the purchase of a home and the improvements needed. This is beneficial since it allows you longer to pay off the cost of remodeling over a longer time period.

Bring in the Professionals

Your first step is reaching out to a trusted real estate pro like Trevor Gearin of CENTURY 21 McLennan & Company, who is familiar with available properties in the area. Then, once you’ve found a home that interests you, hire a professional contractor to have a look and list the needed repairs, as well as estimate the costs for the work. Be sure to make any offers contingent upon a home inspection by a professional, so you can renegotiate if expensive problems are found. When estimating the costs of renovation, make sure you include your own time as well as the costs of having professionals do the work. It’s a good idea to add 10 to 20% to the estimated cost, as there are always surprises when renovating.

Learn about the Different Types of Improvements

Some issues, like painting or switching out hardware are mainly cosmetic, and these can be DIY, as they are generally fixed with less time, money, and expertise. Other issues involve major systems in the house, such as electrical or plumbing, or even foundation problems, and will require professionals.

Structural issues such as dry rot, and replacement of walls or roof are also costly. It’s a good idea to add 20 percent onto your estimate when factoring in costs, especially for these and other major repairs like addressing issues with asbestos or mold.  Many repairs, such as those involved with electrical issues, are essential, yet won’t necessarily be apparent in the appraisal, so they may not actually raise the resale value of the home.

Why Are You Buying This Property?

Do you plan to live in this home, or are you hoping to make it a vacation or tenant rental? If you plan to rent the house to others, you’ll address any big issues with the property. AZ Big Media notes that it’s also a good idea to address cosmetic issues that make an impression on potential renters, such as redoing the floors. Before you begin repairs on the rental dwelling, establish yourself as a business owner, first. This will enable you to deduct the remodeling costs, and it may also affect the type of loan you are eligible for.

Get Your Business an EIN

Many people buy fixer-uppers with the intention of turning them into vacation rentals or tenant housing. If that’s your plan, establish your business properly so you can claim appropriate tax deductions. One important aspect is getting an employer identification number (EIN). This is required if you want to take out loans, hire employees, or open a bank account strictly for the business. An EIN can help keep the finances of your business separate from those of your private life, and it could help to protect you if the business is sued. It’s required if you decide to form an LLC, corporation, or legal partnership.

What to Fix First

It’s important to fix the issues that are basic requirements first. This includes foundation issues, electrical and plumbing issues, as well as the water heater and HVAC system. These things should be addressed before more cosmetic upgrades like floor refinishing. Few renovations completely pay for themselves with increased appraisal value, but some pay off more than others. Consider the return on your investment (ROI) for each component of the project.

House Beautiful points out that laws and regulations vary from state to state and even region to region. Before beginning any work on the property, take the time to acquire the needed permits for your area. If your property is in a development with an HOA, you’ll need to consult with them, too.

Buying a property in need of repair can expand the options available in your budget, although it brings many tasks and responsibilities. Remodeling and repairing a home can be rewarding, but it’s important to be realistic about how much time and money you’ll be able to invest.

by Sarah Noel from taylorandnoel.com