Buying Distressed Properties Buying a Fixer-Upper

by Jennilyn Bylund

Most people would rather buy a home that is in brand-new or nearly mint condition over a home that will require considerable repairs. Very rarely will a buyer purchase a fixer-upper because they fell in love with the home. Normally people who buy a fixer-upper are interested in the fact that they can obtain the property for less then market value, and with a little elbow grease make a significant profit when they resell the home. With this in mind, it is important to be realistic when purchasing a property that will require repairs.

The first thing to consider when making an offer is the price of the home in contrast with the type of repairs it needs. There are two basic categories you can place fixer-uppers in concerning the repairs needed. First, is the cosmetic fixer-upper; these homes typically need some fresh paint and new flooring. Second, is the kind of home that needs drastic renovations such as new plumbing and wiring or structural repairs. The second kind of fixer-upper is not normally worth the time and headache it can cause, unless you obtain the property for significantly less than its market value. As you calculate the offer on any property that will require repairs, you need to subtract the estimated cost of performing the repairs from the offer. You should also subtract a little extra than your estimates to cover anything that comes up unexpectedly.

While making the calculations for a reasonable offer, you also need to take a look at your budget and schedule. How much money can you realistically invest in repairing the property? This, again, should always include a contingency plan for unexpected costs and complications. Also consider what your schedule is like if you plan on doing most of the repairs yourself. You need to schedule out time to complete the repairs so that you don't fall behind on finishing the project. If you decide to contract the repairs out, make sure you have time to periodically check up on the work being performed to ensure that it is not taking longer than needed, and that the work received is worth the money you will pay for it. You should also shop around for contractors to make sure you are getting the best price on the repairs.

If the numbers add up, and you can realistically commit to seeing the project through, a fixer-upper can make a great investment for the future.
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