If you’re thinking about buying yourself a fixer-upper, either for yourself or as an investment property, you’re probably asking yourself, is it really worth the time, labour and most importantly, the cost? There are a lot of considerations that go into determining when a fixer upper is worth it and before tackling such a big project you’ll want to read the list below to make the right decision for you!
Budget and DIY: When fixing up a home, the renovation costs will begin to add up tremendously, especially if you don’t have a solid home improvement budget for your renovations. Price out exactly how much materials, tools and supplies will cost. If you’re hiring a contractor, have them do a tour of the home before you make an offer so they can draw up an estimate. This is your first step to determining whether or not this project is within your budget. As for the job itself, you’ll save more money if you DIY most of the renovations yourself. However, you’ll need to outsource and budget for a contractor if you aren’t the hands-on type, especially when it comes to jobs that take an extra level of expertise. Electrical that is wired incorrectly spells a recipe for a disaster and is not only a safety hazard but will also cost you a great deal of cost down the road. Fixer-uppers are a great choice for those who can either afford a contractor or who have a great deal of home improvement knowledge already and who possess the skills to ensure a DIY remodel is done correctly and safely!
Don’t bite off more than you can chew: A good fixer-upper property is one that is in need of more cosmetic fixes and minor remodels as opposed to major structural work. Repainting the home, updating or refinishing the flooring, minor kitchen repairs, replacing out-dated fixtures and hardware and repairing the dry wall, are all examples of minor repairs. If your property is in need of more structural work, you can expect to invest a pretty penny to cover the costs. It’s suggested that before you buy a fixer-upper home, you get at least three contractors in to offer estimates about how much the repairs will cost and the extent of the job. We advise against purchasing homes that need major structural work, unless you are certain the damage can be repaired and are financially prepared to tackle the potential hassle and extensive costs associated with such a large project.
Always check if the work requires permits and at what cost: Before even thinking about purchasing a fixer-upper property, you should check with city officials regarding the work you plan on doing and whether a permit will be required and at what cost. If a permit is required, keep in mind that acquiring the permit may take time, as you’ll need to abide by the permit guidelines outlined by the inspector of the home. The additional work to acquire a permit, and the cost is sometimes enough to deter Buyers from fixer-upper properties.
Cost of Financing: Undoubtedly the main challenge of purchasing a fixer upper is acquiring the financing to support your home improvement. Keen home Buyers should budget for a down payment and closing costs without having to put themselves in a sticky situation financially. As for additional financing for renovations, larger repairs may require you to apply and be approved for a home improvement or home equity loan. For extra security, you can make an offer contingent on your approval for these loans to ensure you don’t wind up on the hook for the home if your approval does not go through.
Calculate Your Offer: In order to calculate a fair offer for the home, you’ll want to add up the total costs for repairs and updates (including professional labour, materials and tools) based on an estimate of the home’s current condition. Once you have this total, you’ll simply subtract this cost from the home’s fair market value (if it were in perfect shape) using comparables in the neighbourhood. Deduct for inflation also. This value is the value that will determine what a fair offer for the home is. 
Purchasing an older home and transforming it into what you’ve always imagined might seem like a dream, but it’s important to thoroughly review all the factors that go into purchasing a fixer-upper so you know exactly what to expect before taking that leap! With the right know-how, it's more than possible to turn that dream into a reality.
