#1 Financial Benefit of Homeownership: Family WealthWhile growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained how a mortgage is
Should You Invest In A FixerUpper As A FirstTime Buyer
Should You Invest in a Fixer-Upper as a First-Time Buyer?
Buying a fixer-upper is often seen as an easy way to save on a first home without sacrificing on important things like size and location. You can spend considerately less money on a house that needs some work compared to a beautiful new shiny home, and you could even get property in a better area. However, most of the money you save from buying a fixer-upper will go straight into -- you guessed it -- fixing it up. How do you know whether a fixer-upper is right for you?
What Can You Afford?
Your first step should be to figure out what you can afford. As a general rule, the following factors will need to be considered:
Annual income - According to the New York Times, the median household income for first-time buyers is $72,000.
Down payment - How much money you have saved up for this, and what size of down payment you can usually expect.
Monthly spending - Can you cut some corners to make more money for your dream home?
Current average APR - This determines how much you will have to pay for the money you borrow.
Your final figure represents how much you can afford to spend on a house. Therefore, it will include your budget for the renovations, which are likely to cost more than you think. During the buying process, you will have to assess the renovation cost of every property you are serious about and add it to the house price to know how much money you will really be spending.
How Much Can You DIY?
The truth is, fixer-uppers are only really cheaper if you can do most of the work yourself. If the most DIY you’ve ever done is putting up an IKEA bookshelf, chances are you will struggle to save money. Hiring contractors is the most expensive part of home improvement -- just check out House Logic’s guide to the most common home repair costs and you’ll notice labor costs make up most of the price tag. On the other hand, tackling DIY projects that are outside of your comfort zone is a recipe for disaster and could end with you paying more money to get it fixed.
If you are indeed happy and able to do things yourself, make sure you have a plan. Consider the best order to do things, with structural issues first and cosmetic changes second, working your way down from the bigger, costlier renovations to the smaller details. Plan a realistic timeline, set out a detailed budget, and do your best to stick to both. Also, pick up some quality tools such as drills, saws, and hammers to ensure the job gets done properly.
Do You Intend to Stay There?
Finally, you need to consider whether you intend to stay in your first home. Many people buy a smaller home first so they can accumulate enough equity to trade up for a bigger one later on. However, this trend is decreasing, with a large portion of first-time buyers choosing instead to wait until they can afford a better home right away.
Whichever you prefer, you need to consider whether a fixer-upper works within your plans. If you want to buy a home and stay in it permanently, a fixer-upper could be perfect for you, since it frees up enough budget to fully customize your home to your tastes. If, however, you want to start small and trade up for a bigger home, a fixer-upper may only be worth your time and effort if you know you can increase its value significantly through renovations.
Overall, whether a fixer-upper is right for your first home depends on your budget, location, DIY skills, and life plans. This means the answer will differ for everyone. As long as you are realistic about the money, time, effort, and skill involved in the renovations, you will be able to make the best decision for you and your family.
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