Based on home renovation TV shows, you might expect flipping a fixer-upper to be a perfectly satisfying and profitable experience. While this could well be the case, it doesn’t happen by default. A good experience with a fixer-upper depends very much on planning — getting the right house, the right contractors and doing the right amount of work yourself. Here are four key questions that will help you get this right.
Where Will You Look?
Getting a decent fixer-upper within your price range will require some up-front research. You’ll probably spend a lot of your time looking up potential properties online. The ideal fixer-upper needs cosmetic repairs only, so look for houses that don’t look like they’ve been remodeled in a while, or for which the exterior looks unkempt. Most buyers will be put off by this, so the fact that the owner hasn’t fixed the place up before selling might mean they’re open to lower offers. Tell your agent what you’re looking for too, so that they can keep an eye out for you. Another option is to visit foreclosure auctions — Fox News has some great tips on this.
How Much Work Needs Doing?
When you find a prospect, bring in a house inspector. It’s best not to use one recommended by your agent, as they may not have your best interests at heart. Ideally, find a qualified builder experienced in working with older houses. When you get the assessment, avoid places with structural problems, issues with the roof membrane, or problems with the foundation. These problems are usually not cost-effective to repair. For all other issues, you’ll need to get an estimate of the repair costs, which means you’ll also need to find a contractor you want to work with while you’re still looking for a house. With the assistance of your house inspector and contractor, draw up a list of all the work that needs doing.
What Can You Do Yourself?
Work down your list and decide which jobs you can do yourself and which you’ll need professionals to do. For example, you should consider bringing in the pros for any remodel demolition work. Demolition work can be dangerous, time-consuming, and a financial nightmare if you make mistakes. When hiring professionals, most homeowners spend between $1,500 and $3,586 for demolition. Then, with advice from your contractors, put the jobs into order — you’ll want to do the bigger, messier jobs first — demolition work, remodels, plumbing and so on before you move on to cosmetic work. The Spruce has some great tips on how to carry out renovations here.
Can You Make a Profit?
For each item, write down the cost and the expected time frame for completion. Again — wherever you’re hiring contractors, be sure to get quotes from them before you make your bid. This is why it’s important to get a contractor early — they can inspect the house and give you a quote in one pass. For the jobs you’ll do yourself, don’t forget to factor in the costs of tools — do you have a power drill, jigsaw, crowbar, and other equipment you’ll need? If not, will you buy or rent? Once you’ve done this, you can create a budget, and see whether you’re able to make a profit from the house. If the margin is not great, but the area is up-and-coming, you might consider renting it out for a while in expectation of the value rising in the future.
If this sounds like a lot of work — it is! You may end up paying for several inspections before you find a suitable house. However, if you don’t put in this effort and expense, you might end up with a house that’s too expensive to repair, or in the worst-case scenario, one that needs to be torn down. No one likes homework, but in this case, it’s vital — plan, prepare, and then profit.