The perils and triumphs of the fixer-upper
By Dave Parrish
For those of you who know me, you know that I am into fixer-uppers. I have the ultimate fixer-upper and for the most part, I love it. My wife would tell you she’s the project manager in chief and there is no doubt that it’s a love affair because there is no way that we’ll ever profit a penny.
I work with a lot of clients that see the potential opportunity in a fixer-upper. I see it as integral to what I do to be sure the buyer understands what they are getting into, knowing that fixer-uppers aren’t for everybody. Here are some of the major items I advise buyers to consider in making their final decision.
Why are you buying?
There are a lot of reasons to buy a property in need of TLC. Frequently, as happened to me, you can fall in love with a property that has history. Maybe it’s a history connected to your family, maybe it’s a history that you want to be connected to, maybe a history you want to create. All these fall into the category of a love story, and thus an emotional purchase. Others buy with the hope of making a profit, or believing they have found a deal. All these reasons are valid motivations for making a purchase. Understanding and being clear about your motive(s) is step one of checking your decision making process. These motives will be the fuel that drives you through the process of restoration. My advice: make sure that tank is full.
Now you’re clear about the why. Let’s now look at the what. There are two big whats. First: What are your expectations? Second: What needs to be done?
If this is to be a love story purchase, that is a known, confessed and stated out in the open emotional purchase. I would advise examining those expectations to see if you are really up to the challenge. If your motivation is “This is such a deal” meaning: “I am saving money” or “I can turn a profit here,” this becomes an easier decision process, as you aren’t looking at the intangible benefits that come with the “love purchase.” In this case, your expectations can be stated in terms of time and money. Do you have enough of both to reach the end of the project and realize your expectations?
What needs to be done?
Time to make an honest assessment of what needs to be done. So does it need a new roof? What about the foundation? What kind of electrical and plumbing updates are needed? Do walls need to be moved? Floors re-done? Windows? Paint? Landscaping? Look behind, under and around everything. Make a detailed list of everything you can imagine that needs to be done. Nothing is too small to be listed here. Those seemingly little projects can add up to serious time and money projects, even when you are doing the work yourself.
Who will do the work?
Will you do all or some of this work yourself? Do you have any special skills/experience doing these things? Will you hire others? A job poorly done adds no value to a home. My wife and I have taken on many projects only to end up convinced it would have been both faster and cheaper to hire a professional. After 15 years of working on our old house, we’ve finally come to know that you have to know your limits and be willing to pay for your education.
When will the work be done?
Much of the work done on our old house was done by us after work and on the weekends. Our idea of a date was going to Lowe’s or Home Depot to buy supplies. We worked on the house for seven months before we could even move in. I’ve quit flying and sailing because there was no time to do all that had to be done. After 15 years of working on our project (which includes four rental properties), it is still rare for us to do much other than work on our old house.
How much will it cost?
Get estimates. What kind of time frame do you have to work with? If you are flipping a property, time is often a critical factor in turning a property for profit. Refer to “Who will do the work?” Doing it yourself is frequently more expensive than hiring a professional. Get multiple estimates.
In the end, the fixer-upper can be a dream come true or a nightmare. So much of that outcome is dependent on the research you do up front, knowing your limits, your motivation and ability to see a project through to the end. The payback can be life changing, but it is not without cost.
May the market be with you.