FIXIN' TO BUY?

Buying a Fixer Upper? Read This First….. by Jeffrey Rothfeder

When is a fixer upper house worth buying — and when isn’t it? From cost calculations on renovations to finding the means to finance your project, we’ve got a checklist that’ll help you make the right decision.

For people who love old houses — and love to work on them — the notion of buying a fixer-upper can be irresistible. Just think: You can snag a rundown place in a good neighborhood for way below market price, invest some time and money renovating it, and end up with a like-new house that's worth at least twice what you paid for it. Sounds good, right?

Often, it is. But buying a fixer-upper can be fraught with peril. So before you take the plunge, read our home restoration tips to make sure you have a realistic idea of what you're getting into.

Things to Consider When Buying a Fixer Upper

Cost Analysis: Do the Math

Figuring out what you should pay when buying a fixer-upper starts with a simple equation. First, add up the costs to renovate the property based on a thorough assessment of the condition of the house. Be tough with this estimate, which should include materials and labor — yours and other people's.

Next, subtract that from the home's likely market value after renovation, drawn from comparable real estate prices in the neighborhood. Then deduct at least another 5 to 10 percent for extras you decide to add, unforeseen problems and mishaps that have to be dealt with, and inflation. What's left should be your offer.

It's essential that the real estate contract include an inspection clause. At best, the inspection will assure you that the house is a good investment; at worst, it will help you back out of the deal.

Often with fixer-uppers, it's something in between. The inspector will document a serious problem or two, and you can use the findings to get the seller to pay for repairs or negotiate the sale price downward.