Tips for Budgeting for a Fixer Upper

by Allan Wulff, MBA. Ph.D. 01/12/2020

Image by Annie Gray from Unsplash

If you are handy with home repair, you could buy a more expensive house if you are willing to put some work into it. Many foreclosures are often sold “as is,” and require some work. The seller may also be more open to negotiating a lower price based on the number of repairs that need to be done. You could save quite a bit of money if you can do a lot of the work yourself.

The Down Payment

If you budgeted $300,000 for a home, you probably have the 20 percent down payment saved up already. Instead of putting all of that down payment on a $300,000 house, you could purchase a home that would be worth $400,000 if it didn’t need work. Instead, the sellers have listed the home for $200,000. Instead of putting $60,000 down on a home that is ready to move into, you could get a larger home and put down with a $40,000 down payment. That gives you $20,000 that you already saved to put into repairs.

Special Loans

Some lenders have loan programs that are specifically for fixer-uppers. They lend you the amount needed to purchase the home and extra money to make repairs to the house. However, you will have to follow the lender’s rules. The rules vary from lender to lender, but could include:

  • Doing a percentage of the work yourself;
  • Living on the property; and
  • Completing a portion of the work within a specific amount of time.

If you already plan on doing most or all of the work yourself, you’ve met that condition. If you are required to live on the property, you could set up an RV or live in a section of the house that doesn’t need extensive repairs. You could even convert an outbuilding to an in-law apartment.

The hardest part is committing to completing a percentage of the work within a specific amount of time. If you work all day, you only have nights and weekends to work on the house.

Know What Has to Be Done

Before you commit to a loan with terms for extra money to fix up a home, go through the house to make a list of everything that absolutely must be done. You might make a second list of things that you would like to do, but do not stop you from living in the house. Determine the costs of the “must-do” repairs to make sure you have enough money to make those repairs. Then, estimate the amount of time it will take you to make those repairs. You might want to pad the time since Murphy’s Law loves to interfere with your best intentions.

Once you determine that you have enough money to at least get the house habitable and can do it within the lender’s terms, you are ready to make a bid!

About the Author
Author

Allan Wulff, MBA. Ph.D.

Hello and thank you for visiting! Selling or buying real estate is very serious business! I provide extraordinary results! Prior to real estate I was President/CEO of a number of area technology companies, Vice-Chairman of the INOVA Hospital Association and have been a long time member of the Association for Corporate Growth. With a broker’s training and experience, you get more than just a realtor agent. My negotiating skills and astute problem solving capabilities, honed by executive experience, have proved extremely effective for my clients in achieving their dreams and real estate goals in this current complex and fast paced market. As a long time Northern Virginia resident my experience will benefit you whether you are buying a home or selling a home or are a returning client checking out the many homeowner resources my associates and I offer. Buying a home? I look forward to helping you select the home of your dreams by taking time to listen to your needs and desires. Selling a home? My real estate expertise and many effective marketing programs will give you the exposure and edge you need to sell your home quickly for top dollar. Testimonials. I appreciate the opportunity to continue to serve you and hope you take advantage of the valuable resources I provide. Come back to visit often! I consider this community an excellent place to reside and would love to share with you my enthusiasm for the many neighborhoods in the area. I pride myself on providing unparalleled service and look forward to developing a long-term relationship with you. Please feel free to contact me if you would like to discuss how I can best assist you with your real estate goals. Sincerely, Allan Wulff