How to Budget for a Fixer Upper

by Suzi Moret 12/22/2019

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

Suzi Moret

 As a Real Estate Broker in Napa Valley, Suzi Moret brings a wealth of creative talent and knowledge to the local marketplace which, coupled with her genuine enthusiasm and passion for helping others, continues to give her an edge in delivering maximum results to her clientele. Suzi is widely respected among the brokerage community for her ability to get the job done and impeccable attention to detail that ensures a smooth transaction for everyone involved. Whether utilizing her well-honed design skills to assist a seller in attaining the highest possible value or finding the ideal property that meets the specific needs of a buyer, she takes pride in providing an unparalleled level of customer service. Prior to obtaining her real estate license in 2004, Suzi owned and operated her own business, "Amazing Cakes," for 13 years. A true philanthropist at heart, she continues to volunteer her time and talents throughout the Napa Valley, from decorating venues and planning menus for fundraising events to sharing her culinary and hospitality expertise. "I am always willing to lend a helping hand," says Suzi, who has also served on the Napa Chapter of the North Bay Association. In her spare time, she enjoys cooking and entertaining for family and friends. Backed by the tremendous resources and support of the company she represents, Suzi Moret looks forward to assisting you with all your real estate needs throughout the Napa Valley.