Should You Buy a Fixer Upper?
Before you think about buying a fixer upper, below we list ten factors that will determine whether you should buy a fixer upper.
18/11/2022
Are you an avid watcher of TV shows like The Block, Flipping Houses and Grand Designs? .Then you’ll be aware of the potential returns you can make from buying a rundown property, well below market value, within a desirable neighbourhood and transforming it into a home where you, or someone else, would be proud to live.
However, before you commit to the purchase of a property on which you intend to do major renovations, there are several things you need to consider.
Overall, ten factors determine whether you should buy a fixer upper. Outlined below is an overview of them all.
TV programmes have fuelled an increase in demand for fixer uppers.
What to consider when buying a fixer upper
1 | How will you fund it?
When buying a fixer-upper, the first thing to bear in mind is how you plan to fund it.
Whilst you may have some savings put away and may be able to rely on contributions from your parents, most people will need a bank loan.
The type of loan you require will depend on your plans for the property. For example, a bridging loan might be appropriate if you plan to sell it immediately, while you may need an investment loan if you don't plan on living there.
2 | How much time do you have available?
One of the best pieces of advice you could be given about undertaking major renovation works is that they always take longer than you expect.
Redeveloping a home is a massive commitment and successfully doing it is contingent on you being able to devote significant amounts of time to the project.
Delays often occur, and you often hit obstacles that require your immediate onsite presence to make critical decisions on how best to proceed.
Before you undertake such a large body of work, you should realistically evaluate whether you have the time available to do so. After all, it is better not to start something that could become a labour of love, which you do not have the time to complete.
Always expect the unexpected - Most major renovation projects always take longer than you pan for.
3 | Are there any structural issues?
Fixer-uppers can often have hidden surprises in terms of damp or structural issues. So you must arrange for a building and pest inspection to take place as well as contracting a slab leak detection company.
Both can result in significant delays to the project. They can also lead to increased costs and massive frustration.
Although it involves a cost, it is a clever thing to do. In a worst-case scenario, you might find your potential goldmine quickly turns into a condemned building that needs demolition.
Arranging for the report to be undertaken will not only make you aware of any issues the property might have. But it can also help you negotiate a better buying price if it requires lots of work.
Prevent any hidden issues that may incur additional costs by arranging for a property inspection beforehand.
4 | Determine the full scope of work
Once you have received the building and pest inspection report, you will need to consult a professional builder to determine the full scope of the work required.
From this meeting, you should be able to ascertain whether a structural or cosmetic renovation is needed.
Structural renovations are typically more expensive than rearranging layouts and modernising the home. Therefore, you should carefully evaluate whether the project is financially viable for you to manage before giving it the green light to proceed.
5 | Determine council restrictions
Each council imposes restrictions on constructing new houses and renovating existing properties.
Before buying a fixer-upper, it is worth establishing what council restrictions may apply to the work you plan to do on it.
The best way to do this is to present your proposed works to a council town planner. They will be able to assess your plan and advise you of what you can do, as per local and federal state legislation.
8 | Set a budget
Based on what needs doing, you will need to set a realistic budget for the project before starting it.
Ask all tradies you intend to engage the services of to provide you with a detailed quote in writing. Be sure to add a 10% contingency fund into your budget to provide cover for unforeseen costs.
Once you have determined an overall budget, you must make an honest assessment. Can you afford to fund the project? And is it financially viable?
A prudent buyer will calculate an extra 10% on the cost to fund any unforseen costs.
7 | Where will you stay?
If you intend to live in the property after you have finished renovations, you will need to establish where you will stay while the work is in progress.
Many people tend to overlook this detail when planning their project. But it is necessary to establish where you and your family will reside during the redevelopment.
You may have to rent or stay with your parents or friends. Alternatively, you might be able to live in a caravan onsite. Or even in one part of the property once certain aspects of the work are complete.
All this will need to be determined before the renovation project begins.
8 | How will you juggle the workload?
Unless you have quit your job to work full-time on the project, you will need to be clear about how you will divide your time between your day job and the renovation.
It is worth drawing up a schedule of when you plan to be onsite and what work will take place when you are there. Doing this provides a timeline to help you gauge whether the project is on track.
9 | How will you manage the stress?
Even for the most seasoned professional, renovations can be a stressful experience. So for someone who is doing their first fixer-upper, how you manage the situation is very important.
The best thing you can do is establish a good working relationship with your builder. You can do this by keeping communication clear and open during the entire renovation process.
Whilst the project is ongoing, you will also need to ensure you take regular breaks from it. To allow you to stay fresh, focused and on top of your decision-making capability.
When undertaking a stressful project, relaxation and switching off are imperative and you will need to make sure you are doing this regularly.
10 | Don’t over capitalise
If you intend to sell the property as soon as the renovation has finished, you mustn't overcapitalise your investment.
While you might think certain design features or amenities are good additions to the property, prospective buyers might disagree.
Therefore, before you begin the renovation project, set up a meeting with a real estate agent with expert knowledge of the local market. They will advise if your proposed works match what buyers are after.
If they say it does, it should give you the confidence to proceed with your vision.