10 Tips For Buying A Fixer Upper

Posted by on Monday, October 16th, 2023 at 11:17am.

The real estate market in Chattanooga has changed a bit over this last year. We’ve gone from historically low interest rates and houses selling within hours back to what was considered a “normal” market. With interest rates around 6%-7%, getting approved to purchase a home has become a little more expensive which can make it harder for a first time home buyer. One of the best ways for a first time home buyer and even an investor is buying a home that needs updates. Buying a fixer-upper can be a great way to get into the real estate market and potentially build equity while customizing your home to your preferences. However, it's essential to approach this type of investment with mindfulness and a well-thought-out plan. We’ve put together a plan to help you get started when purchasing a fixer upper.

Define your goals | Determine your objectives for the fixer-upper. Are you looking for a long-term home, a rental property, or a quick resale/flip? Your goals will influence the type of property you should look for and the extent of the renovation needed.

Set your budget | Establish a clear budget, including both the purchase price and the estimated renovation costs. Do your research! Also, be prepared for unexpected expenses that often come with older homes. Always make sure you have a bit of a buffer with your budget.

Location, location, location | Choose a neighborhood or area that aligns with your goals and budget. Research local property values, amenities, and future development plans. This is incredibly important to know based on your ultimate goal. You don’t want to put too much money into a home and it be the most expensive house in the neighborhood.

Find a real estate agent | Work with a real estate agent who has experience with finding homes that need renovations. They can help you identify suitable properties and provide insights into the local market as to if that property would make a good investment..

Inspection | Look for homes that need cosmetic improvements or have hidden potential rather than those with major structural issues. We always recommend having a thorough home inspection. This will help you uncover hidden problems and potentially negotiate a fair purchase price. This is also a great time to have licensed professionals like plumbers and electricians inspect areas of concerns.

Calculate renovation costs | Once you have your inspection report, create a detailed renovation budget. Include estimates for labor, materials, permits, and a contingency fund for unforeseen issues. Also, what can you do yourself vs hiring a professional?

Plan a timeline | It’s incredibly important to have a time line in place. Consider things like do all of the renovations need to be done prior to moving in? Can you live in the house while renovating it? Like your budget, always add a buffer with time! Sometimes life will happen or you’ll find a repair you need to do first. It’s easy to get excited and think something could be a quick weekend project when in actuality it’s more of a 4-5 day project. Never cut corners with your work just for the sake of getting it done quickly.

Obtain permits | One thing many people don’t consider is if a permit is required. Basic cosmetic updates like paint and flooring won’t require a permit, but if you start to consider changing walls, rooms, layouts, etc. then a permit may be required. Ensure you have the required permits for your renovation project, as this can affect the resale value and your safety.

Maximize Value | Focus on renovations that add the most value to the property, such as the kitchen, bathrooms, and curb appeal. Your real estate agent will be able to help with what areas of the home will be ideal to focus on.

Stay Patient | Renovating a fixer-upper can be challenging! Go into the project knowing that surprise will happen somewhere along the way. Stay patient and focused on your goals, and don't cut corners on quality.

Bonus tip | Explore your financing options. You may qualify for renovation loans or consider traditional mortgages, depending on the property's condition and your financial situation.

Buying a fixer-upper can be a rewarding endeavor, but it requires careful planning and a realistic approach. With the right strategy and a clear vision, you can turn a neglected property into a valuable asset. Remember to consult with real estate professionals, contractors, and inspectors throughout the process to make informed decisions.