How can I tell the difference between a fixer-upper with potential and a money pit?
Monday, August 20, 2018
Here’s our 7 rules for weeding out the fixer-upper money pits from the ones that offer solid upside potential:
Separate “dirty and dismal looking” from the real problems - This is not always easy. A moderately soiled carpet can often be cleaned to look nearly new. Deeply dirty and torn, it needs to be replaced at much more expense. Weird wall color disappears with two coats of paint. Mold stains in the wallboard indicate a likely problem in the wall itself. An overgrown yard that is trimmed back changes the whole look of a home at not much expense—unless there is a costly tree removal required.
Compare with alternate choices carefully - We recently inspected two older condominium units in the same complex with identical floor plans and kitchen/bath remodeling within the last few years. The first one had a non-functional and ancient HVAC system, along with a rusty and leaking water heater that needed replacement. It was price-reduced to $55,000. The second unit was priced at $75,000 and had functional and satisfactory looking HVAC and water heater. But they were both 12 years old. The cost of replacement of the HVAC and water heater for the bargain unit would be $6,000, and you would have new systems with a full lifespan ahead of them. The second unit’s systems had only an about 3 to 6 years of life left before replacement would likely be needed. The unit with non-functional appliances was a bargain by comparison, as long as you have the cash for replacements ready.
Determine what level of remodeling will be acceptable - Although those home remodeling TV shows demonstrate how much some fresh paint, a clever piece of trim and new pulls can revitalize kitchen cabinets, sometimes they look like exactly what they are: dolled-up old cabinets. Carefully evaluate how far you need to go to satisfy a potential buyer or yourself.
Get real numbers, not “guesstimates” - An actual bid from a licensed contractor with good references is the real thing. Everything else is just talk.
Walk away from an unquantifiable problem - Any house with a problem that you cannot determine the extent of, or the cost the necessary repair, until after you have bought it is one to take off your list—unless you are a gambler and feeling lucky.
Get a professional home inspection report - Since we are home inspectors, you are probably not surprised we would recommend this; but an opinion from an unbiased professional will give you some peace of mind about your choice—or a reason to reconsider.
Add an allowance for the unexpected - Every older home has a few hidden surprises waiting to be uncovered. We recommend adding 20% to your estimate for surprises.
If you want to learn more about evaluating older homes for potential rehabilitation, click below to download HUD’s Residential Rehabilitation Inspection Guide.
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To learn more strategies for getting the best possible home inspection, here’s a few of our other blog posts:
To read about issues related to homes of particular type or one built in a specific decade, visit one of these blog posts:
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