Advice about fixer-uppers?

In My Humble Opinion
1

Hey, y’all! :slight_smile:

I’m looking for some advice from those who have maybe had some experience with this situation… I’m definitely buying a house this summer in Nashvillle, and in the price range I’m in, with the parameters I have, I’m keeping open the possibility of fixer-uppers. But here’s the thing: the house does NOT have to be cosmetics-only, which is what most people are looking for. I do have the financing for a genuine structural fixer-upper (might need HVAC, new roof, siding, wiring, plumbing, etc.) If it’s worthwhile, I would do it.

Does anyone have experience with this? What realtors handle true fixer-uppers? Everything I can find seems to be geared either towards people who only want houses that need paint, or investors who are planning to flip a house right away. I want to live in the house for at least two years. All advice appreciated!

2

I’d say this is headed for IMHO.

If you’re serious about rehabbing, you should take a hard look at eliminating the real estate agent and his/her fees. The tried and true method is to drive around looking for suitable (i.e. neglected) properties and then visit the county Registry of Deeds to see who owns them, for how long, prices paid, delinquent taxes, liens, rights-of-way, etc.

3

We bought our house in 2001 and it was a true fixer upper. It is a true colonial house built before 1760 on 2.5 acres of land. My wife and I wanted a fixer-upper because the Boston housing market was insanely expensive even then and that was the only way we could get the house we wanted. The house was almost completely neglected for about 50 years and inhabited by a man that inherited it from a long family line. We were fully prepared for what we were doing because my wife’s family restored a very large circa 1790 farmhouse in New Hampshire that was actually missing some exterior walls when they started.

We spent most of the first two years working hard on the house almost every day and we also had help from family. We lived without a kitchen (as in there was just a hole where it once existed) for 9 months early on. We have sunk about $120,000 of our own money into it over the years. As luck would have it, a microburst hit our property about three years ago to the day and felled a 200+ year old oak tree straight into the part of our house that juts back almost like an original annex. That caused about $260,000 in damage although it didn’t touch the main part of the house that we so prized. The repairs took almost 9 months, 4 of which we had to move out. This was almost old hat by that time and the tree took out the part of the house that we would have chosen.

Our house is beautiful now by all accounts but we always have some work going on. If you are looking at a structural fixer-upper you really need to think in terms of years rather than weeks or months, You also need to have your soul committed to the project and find the whole process rewarding. It is generally a tremendous amount of work and you need to overbudget by at least double to be safe. Try to do whatever you can yourself even if it is just demolition or removing wallpaper. All contractors are expensive even for mundane tasks. Regular real-estate agents deal with fixer-uppers or at least some of them do. We bought our house through an agent that normally dealt with farms.

4

Some fixer-uppers are such because they are considered historical and have serious limitations about what can be done to them, and the owners can’t afford or be bothered to go under those limitations. Make sure that the property you are interested is either not historical or that you can live with the restrictions.

5

Just an observation … Most houses listed by realtors as “fixer-uppers” are really “knocker-downers”. YMMV

6

If significant repair work is not an issue, you should check online for houses being sold by the government. Most are houses that were abandoned and seized for unpaid taxes. You’ll find some great prices. This site will get you started.

7

Thanks for all the advice! :slight_smile: I should maybe be clearer about what I’m looking for… I plan to probably move from the area in 2-4 years, so I am NOT interested in investing my soul and spending years on a fixer-upper, LOL! :wink: It would be a SMALL, decidedly NON-historical house (I wish y’all could see the areas I’m looking in-- not a lot of history involved,) that would need maybe significant but OTOH far from never-ending repair work. Mostly, it would be the kind of work that a lot of buyers would balk at because any need for any repair beyond purely cosmetic causes a lot of financing problems for most. Anything cosmetic, I would certainly do, but I know better than to try roofing or HVAC installation. I would end up with a nice property that I would live in until I moved, and then rent out through a property management company.

I truthfully don’t know how likely I am to buy a house this way, but I’d like to have it open as a possibility.

8

If you can afford the repairs, why can’t you afford a house that doesn’t need them? :confused:

9

My first house was a fixer-upper of sorts; there was nothing really structurally wrong with it. The owner had just taken it off of the rental market, and done some basic curb-appeal type of work to it – new roof, windows, and vinyl siding. From 1998 (when I bought it on a $12.70/hour wage) through 2004, I had to do all of the following:
[ul]
[li]Side the garage.[/li][li]New door on the garage.[/li][li]Wall-panel the garage.[/li][li]Knock down some crummy half-wall thing between the living room and kitchen.[/li][li]Revive the lawn (weedy, pool marks, stumps).[/li][li]Landscape (railroad tie “retaining walls”, trees, bushes, flowers).[/li][li]Built a garden.[/li][li]New chain-link fence to replace the nasty wood and rusty chain link.[/li][li]Re-drywall where the wall panels were covering up rottenness.[/li][li]Rip down nasty wall paper.[/li][li]Paint the entire interior.[/li][li]New carpet almost everywhere.[/li][li]Tile in the kitchen and entryway.[/li][li]Built a built-in home office.[/li][li]Rebuilt the laundry room.[/li][li]Installed central air.[/li][li]Wire the house for cable.[/li][li]Replace galvanized piping.[/li][li]Upgrade service to 100 amps circuit breakers from 60 amps fused.[/li][li]Gut the kitchen completely and install all new, premium everything (yeah, the Corian was probably a bit too much for this particular neighborhood, though).[/li][li]Gut the one, single bathroom and start from scratch (except the tub, on which I installed a liner).[/li][li]Many other things I’m probably overlooking right now…[/li][/ul]
How did I find this miracle house? I walked into a real estate agency and asked for a buyer’s agent, and let him know the price range I could afford. The fixer-uppiness came with the territory.

Notes: (1) my income increased rapidly after having bought the house; I’d not’ve been able to do all of that work on such a wage, at least not as fast. (2) I sold it for $30,000 more than I’d bought it, which is probably slightly ahead of break-even. Not an impressive looking figure for six years until you consider that it’s a >42% appreciation.

10

Start at the bottom. Literally.

The thing to first determine is the condition of the foundation. Is it sinking in any area? Are there significant cracks? Is water leaking and is the property draining properly? If there is a septic system, what is the condition?

If the foundation is structurally sound you can do pretty much what you want, you can budget the repairs fairly accurately and you will see pleasing result. If there are problems with the foundation, the sky is the limit as to how much you will have to sink (pun?) into it and you will be forever frustrated.

11

It’s not exactly a question of what I CAN afford, but of how much money I want to tie up in a house when I’m making more by letting it stay where it is. I’ve had an 11% return on my investments, averaged out, every year, with no work on my part, or guessing what’s going to happen to a market. If it was just a question of money and that’s IT, there wouldn’t be any compelling reason to buy a house right now. My financial advisor wasn’t wildly enthusiastic about it, so he pretty much said that the best reason to do it would be if I absolutely wanted to live in a house and work on it (which I do. I really miss both aspects!) But I need to make sure that it makes financial sense for me, rather than just focusing on the “can I afford it?” question. So that’s why I’ve looked at the structural fixer-uppers.

12

Your question seems to boil down to: will certain rehab projects knock more (or equal) money off the price of a house that they will ultimately end up costing you? It’s really the same question as “Can I make money flipping this house,” except you really only want to break even, not make a killing.

I think that question is probably too broad to answer. In a sluggish real estate market, I’m sure you’ll see houses that need to be reroofed or resided hanging around in listings for a while as the price drops by $10,000 every month. If you’re in an area that still has a hot real estate market, my guess is that any house than can be reasonably rehabbed into some kind of shape will not fall enought to be a deal. Any major repair (like foundations or plumbing) that will involve contractors will probably end up costing more money than you save (and more headaches than it’s worth).

You seem to be basing all this on the assumption that you’re willing to take on more than the average buyer, and so that a sliver of the real estate market – too beat up for the average Joe but not a teardown – will be a good deal for you that most people won’t recognize. I think this might be naive. But I have spent many years living in really silly real estate markets (San Francisco, Jersey City, Harlem, the Lower Hudson Valley), and I know nothing about the housing situation in Nashville (except that you have that nice Parthenon).

If I remember right, the MLS listings rate houses’ condition A through E, where A is new construction and E is a teardown. My realtor (who was a great and honest guy) said that A and E were pretty consistent, but that B, C, and D could vary wildly depending on who wrote the listing. Obviously, there’s no benefit to the realtor to list a house as needing minor repairs when it’s about to fall over, because all you are doing is annoying people. Anything rated B thru D will have something in the ad like “just needs some TLC” or “a great starter home,” but everything in the ad will be misleading crap anyway. I never saw the words “fixer-upper” in a realtor.com listing, I don’t think.

The big problem as I see it is the time you actually spend looking at old houses – which obviously need a lot more careful attention paid to them than brand-new condos – plus the money spent on house inspectors (which you’d be crazy not to do) may make finding this dream combination of a-lot-of-work-but-not-too-much-work difficult to find. Anything that will involve contractors can easily end up costing more (and taking longer) than you’d guessed. And the risk with an old house is that every repair will uncover 2 more needed repairs. I think if you’re keen on saving money you’re better off shaving down the price via location and size, and sticking to houses that only need repairs you feel you can do.

13

A couple of things to remember.
Every project will take longer and cost more that you anticipate.
It takes more than 30 minutes to renovate a house. What you see on those shows is home improvement porn. Bears little resemblance to reality.

14

My advice is to buy something in good shape. If you aren’t planning on being there that long, than don’t buy something that is going to be a construction site for the time that you are living there.

My wife and I bought an old row house that was structurally sound in 2005. A lot had been neglected but there had been some updates to the heating and the electrical. We had to replace the roof which previous owners had kept patching instead of replacing. We installed central air, and installed a washer, a dryer, and a dishwasher which the house did not possess.

Remember that an old house may need work that isn’t immediately apparent such as plumbing and that the wiring may be ancient. If I had to do it again I probably still would but we are planning to stay for a few more years and I still have second thoughts about that.

Also, it is always more expensive than you think it is. Depending on the age of the house, you will have to custom order things such as doors because the sizes are odd or the jambs are much thicker. My door jambs are six inches instead of four inches. This made ordering doors more expensive and ultimately I gave up on pre hung and had a guy cut some solid wood doors into place and hang those instead.

15

2-4 years is a scary window right now. I am not an expert on any relevant field, but it seems that the market is sliding down. You might not recover your money at all. When the time to sell comes, your fresh and renewed home might be worth the same (or less) than what you paid for it when it was a fixer-upper. Study your local market and see what it is doing.

16

I really and truly don’t think your strategy is sound at all. Unless you have some serious experience refurbishing houses that you didn’t give, I don’t think you have the experience or the perspective to pull it off well. Your time-frame is way to tight and your motivation doesn’t match why someone would do that. It is a very risky investment in the first place and could end up costing you money even after years of work. The type of project you describe is very hard, tedious, and long plus it requires some expertise and the willingness to give up your nights and weekends over long lengths of time.

17

Hey all-- I appreciate all the advice, but I’m still not sure I’ve explained this very well. I did see one house today that might be a good example of what I mean. I am not saying that I’m running out and buying this house or ANYTHING like that-- it’s just an example. It’s in a great neighborhood, exactly where I want to be, great square footage, the obvious stuff (at least) has been done, interiors look great, etc. However, it’s listing for a lot less than it should be, and my suspicion at this point is that it’s because the asphalt siding will have to come off and be replaced.

Let’s say, just for the sake of argument, that there was nothing else wrong with the house I couldn’t have fun fixing cosmetically by myself. However, Regions Bank WILL say “it’s a structural fixer-upper, and we will only loan you the appraised value.” The amount needed to re-do the siding will NOT be loaned, just the price of the house as it is today.

In fact, Regions wouldn’t loan the mortgage amount, either, in most cases like that. I know people it’s happened to. They were all ready to close on a deal, there were structural problems that were really very minor, but Regions (and every other bank around here that I know of) would not go through with the loan because they WERE defined as structural repairs and not cosmetic. It’s not that they were an endless nightmare of God-knows-what being wrong, and Regions demands estimates of what would have to be fixed anyway (so at least you have some kind of idea.) It’s that the buyers didn’t have $10,000 in cash, let’s say, for the rehab portion, and the deal fell through because of that.

THAT is the “market niche” that I MIGHT be interested in IF I could find a house in that exact kind of situation. I am not interested in huge rehab projects where 18 structural things need to be done, but in a house that has one or two structural problems that would normally keep the bank from making the loan at all because the buyer couldn’t afford the new roof, etc., WITHOUT the loan. It’s not that someone else couldn’t figure out this was a niche; it’s that they simply WOULD NOT HAVE the cash to shell out to redo the siding, or whatever it would be, and Regions will not loan it. The difference with me is that I already know Regions will do the mortgage loan for me in this case, and I DO have the cash to have the non-cosmetic rehab done.

Now, whether this is really the way I want to go or not, I don’t honestly know yet. I’m just keeping it open as a possibility. However, that’s exactly what the situation is, and hopefully it’s a little clearer now. :slight_smile:

18

Informed opinions are best solicited in IMHO. MOved.

samclem GQ moderator

19

The only problem with this idea is that these kinds of houses can be purchased with a construction loan. A lot of my neighbors bought homes with structural or other kinds of problems using a construction loan which they used to pay for renovations. So the niche is smaller than you think. There is financing available to purchase these kinds of houses.

20

I have spent the last several days doing NOTHING but driving around the exact neighborhoods where I want to be, and I have found several homes that would fit my requirements. I don’t know who’s financed what, but I DO know several people who did rehab financing and were extremely sorry later. It’s available, all right. So is predatory lending. So are foreclosures and bankruptcy because people never should have taken on that kind of debt to buy a house. I also know people who had all their financing fall through at the last minute because the house was appraised as needing structural repairs that were very minor. THTA and FHA loans certainly won’t go through unless the buyer pays CASH to have the structural stuff done by licensed contractors only before closing. So I’m not going to get into that! I do appreciate all the advice, and it’s helped me zero in on exactly what I do and don’t want to get into with rehab. :slight_smile: