You are the type of home buyer that loves a challenge. You love buying homes just to spruce them up, and sometimes, you sell them too. You see the potential in the worst fixer-upper homes and you create incredible new homes for everyone to enjoy. Yet, you may yet encounter the biggest conflict of this hobby of yours; mitigating the difference between the purchase price of a fixer-upper and the fixer-upper costs. Here is how you can do just that.
Haggle the Price to Come Just over or Just under the Expected Remodeling/Renovation Costs
Anyone can haggle the price of a home. When it comes to fixer-upper homes, you have to know about how much it will cost to fix everything that is wrong with the house. A home inspection can help you figure that out. Then you can take a list of cost estimates into consideration when you make an offer on a particular house. Bid low enough that the money you have left will cover most of the remodeling and renovation costs, but high enough that you are still paying close to the assessed value of the property.
If you can, bid about a couple grand less than the assessed value of the property, just to start. Sometimes this helps you get a really low price on the property, even if you have to come up or just slightly over the assessed price. These really low bids help the seller come down to sell, while giving you wiggle room to come up to sell and still have money left over for all of the fixes and repairs this property needs.
Get a Real Estate Agent to Invest
So, the agent that shows you the house and is actually interested in buying it for him/herself. Hmmm...that could be invaluable, if the agent is willing to go in "half-sies" with you on the price of the house. Then you both could buy this project house, do the work to create a new home, sell it all over again, and split the profits.
Of course, you would have to make sure that the contract between the two of you ensures that you get back every dime you put into the house, including your original half of the purchase cost. Still, approaching a really run-down property this way can help reduce any potential losses if the house does not sell for what you expect it to.
Focus on the Worst Areas
Cosmetic repairs are one thing, but structural issues are entirely another. When you have "x" thousands of dollars in your budget, and you are trying to make a house look fabulous, you still have to focus on the worst areas to work on first. You could remodel the kitchen. Yet, if you discover a ton of mold, mildew, and rot, you will need to either divert more money that way to accomplish your goals, or lower your expectations for what you want to spend on the remodeling in order to address the structural issues.
If you divert money from your budget to the kitchen to keep the same project goals there, you will have to lower your expectations for another area of the home. It helps to look for really good sales and deals on remodeling materials. That will help you reduce your overall costs and still do a lot of what you want, and need, to do with the house.
Ask for a Much Higher Price
Should you decide to sell this newly renovated and remodeled home, ask for a much higher price. A good rule of thumb is $20,000 above what it cost you to purchase the property and make it beautiful. The buyer is only likely to bid up to $10,000 less, which still leaves you with a decent profit.