Considering A Fixer-Upper? Follow These 21 Tips

Fixing up a house — either to live in or to flip — has become an increasingly popular dream, and it makes sense: Who doesn’t love watching all those shows on HGTV while you ponder how much money you could make on your own flip (or how nice it would be to live in a fully upgraded house) one day?

That’s the dream, anyway. The reality can be a lot messier, and a heck of a lot more expensive, than what you see on television. So before you start thinking seriously about buying a fixer-upper, make sure you know what you’re getting into and how to come out on top by following the best-practice tips.

Be realistic about project scope


The fixer-uppers that need the most work are going to be priced at the bottom of the market, and therefore they’re probably going to be pretty attractive — especially to someone who’s never fixed and flipped a house, and who doesn’t necessarily understand what’s involved. And oftentimes, a fixer-upper requires more than just a cosmetic update; there could be structural issues, plumbing problems, or the house might need to be rewired entirely, just to name a handful of potential fixer-upper pitfalls.

Not only do you need to be realistic about the project scope for each individual fixer-upper that you’re considering, but you also need to think about your own, personal project scope wants and needs. Are you hoping for an almost-move-in-ready type of job, where you’ll just be replacing some flooring and painting the walls? Or are you prepared to tackle a full gut-and-repair type of job?

Set a budget


It’s probably not a newsflash that updating a house costs money — sometimes a lot. The fixer-upper itself might not be all that expensive, but bringing it up to par with the rest of the market (or above) is definitely going to cost you. Talk to any partners going in on this project with you, and ideally a financial advisor, to hammer out how much you can realistically afford to spend on the fixer-upper and to explore any funding ideas that you might have.

If you’re not sure what a realistic fixer-upper budget looks like in the area where you’re searching, then it’s useful to find a local contractor who can give you some ballpark figures for what you can expect to spend. (And you’ll probably be glad you connected with that local contractor before all is said and done, anyway!)

Set a calendar


Buying a fixer-upper to improve and live in might not require a strict calendar, although it is a good idea to give yourself some general parameters around how long you really want to spend working on the house, whether it’s one year or five. But if you’re planning to fix-and-flip the house, or fix it up and rent it out, then a calendar becomes much more critical.

Remember: You are on the hook for the mortgage while you own this house. If you can’t fix it within your ideal time frame, then not only will you be paying for the repairs, but you’ll continue to carry the mortgage loan, too. And if it doesn’t rent or sell as quickly as you’d hoped, then that’s another month of payments you’ll have to make. 

This is another area where a local contractor or even a real estate agent might be able to help. They usually know a lot about the permitting and repair process, not to mention the local contractor market and how busy or relaxed it is at any given time of year, and they can give you a guesstimate as to how long fixing a fixer-upper should take.

… Then be willing to wiggle with both


Of course, life happens, and you can’t always expect things to go according to plan. Contractors don’t always know how much help they’re going to have, or they might be booked for months — and weather can also be a factor. That’s why it’s always smart to remember that your budget and calendar might act more as guidelines than hard-and-fast rules, and you should be prepared to extend one, the other, or both beyond your projected expectations.

If you know going in that your budget and your calendar aren’t set in stone, it’ll be easier to bear when something inevitably shifts and you wind up a little bit (or a lot) behind schedule or over budget. Just have a contingency plan in place in case that happens so you don’t overextend yourself financially.

Find the right location


Some fixer-uppers are going to be a lot more lucrative for an investor than others — and to find them, you’ll want to start with location. A fixer-upper that’s surrounded by a bunch of houses that also need a lot of work isn’t going to flip for as much as one that’s surrounded by luxury homes, for example. And even though you probably won’t find too many fixer-uppers surrounded by luxury homes, there are plenty in up-and-coming neighborhoods that are just as potentially viable.

Talk to an expert in the area (like a real estate agent) about where to find a house that needs some TLC but could yield a great return for you, and then start targeting homes in your price range in that spot. That’s the best way to narrow your search in a manner that doesn’t restrict you too much and gives you the highest chance of finding an excellent deal.

Look for a ‘most popular’ house


The most popular type of residential property in the area is going to vary depending on where you are. In some suburbs, it’ll be a three-bedroom house with a yard, while in other downtown artist enclaves, there will be a lot more demand for studio condos with room to create. A hotspot for retirees might favor one-story homes with just two bedrooms, and maybe graduate students in the nearby college town are most interested in small, easy-to-manage units within walking distance of campus.

Wherever you find that fixer-upper, make sure you understand what the most popular homes in its neighborhood look like. If the fixer-upper doesn’t resemble that profile — and it would cost a lot of money to get it to conform — then you should probably pass and move on to the next opportunity.

Think about the layout


It’s not enough to just know how many bedrooms and bathrooms are ideal for your target renter or buyer (or yourself). You’ll also want to look at the home’s layout and ask yourself whether it needs work, and how much that work might cost.

For example: Many modern homes have an open floor plan between the kitchen and dining room, and sometimes the living room, too. And newer parents often prefer a master bedroom that’s on the same floor as their baby’s nursery or toddler’s room. Think about the type of person who’s most likely to want this house when you’re done with it (even if that’s yourself!) and then ask yourself what needs to be fixed in the layout (if anything) and whether you can afford to fix it.

Consider condition


Some fixer-uppers are going to be easier to handle than others. A house that was mostly well-maintained but not updated significantly for decades is probably going to be an easier lift than one that’s been sitting abandoned for a couple of years. If your budget and timeline aren’t going to accommodate a house that’s in really bad condition, then you need to know that before you make a mistake and put an offer on a house in really bad condition.

Real estate agents and real estate inspectors are pretty familiar with the typical problems that houses encounter (and it’s slightly different depending on where you live, the climate, the neighborhood, and so on). If you’re not sure what big condition red flags you should be seeking out, then tap someone like that to help you set some parameters around condition.

Know your loan options


Some people think a mortgage loan is a mortgage loan is a mortgage loan — but those people probably haven’t been keeping up with the financial industry. There are a lot more options for buyers these days, including loans specific to fix-and-flip deals that usually involve shared equity. In other words, there are companies out there that will help you with the down payment or finance the sale and possibly even pay for repairs on the home in exchange for their money back and a slice of the profit you make from the sale.

Depending on what your plans might be for this fixer-upper, talk to a mortgage broker and do some additional research to figure out what options you might have. You’ll probably be pleasantly surprised by how many there are!

Get a pest inspection


Hopefully you’re well aware that a general inspection is very important when buying a fix-and-flip, but there are other inspections that might not be on your mind but that are still a really good idea. A pest inspection is one of them — one of the last things you want to discover when you start to take on the serious repairs is an infestation of insects, rodents, or any other wildlife that doesn’t belong inside. If you live in an area where there aren’t a lot of pests, maybe you can skip this one, but it’s almost always worth considering.

Consider a sewer line inspection


Did you know that some sewer lines are made with clay pipes — or Orangeburg pipes, which are made from wood pulp and tar? When a sewer line backs up or breaks, it’s not very fun for the occupants, and this is an inspection that may turn out to save you a lot of money, especially for an older home. If you have any misgivings or questions about the sewer line, don’t play a guessing game; call in a professional.

Think about an engineering report


An engineering report and structural inspection will tell you everything you need to know about the foundation on the house, and whether it’s at risk for any future issues. This isn’t always a necessary part of a transaction, but with a fixer-upper — especially an older one in poor condition — it’s probably not a bad move to cover your bases and get someone to take a look at everything before the final papers are signed.

Facilitate communication between players


There can be a lot of people involved in polishing up one fixer-upper, from real estate agents and inspectors and appraisers and mortgage brokers or other loan contacts during the buying process, to general contractors and specialists during the actual fixing, and possibly future renters or buyers, too.

One person is probably going to know more than anybody else about exactly what’s going on with this fixer-upper — and that’s you. So to make sure you’re successful and everything sticks as close as possible to your schedule, be prepared to act as the point person and facilitate communication to the best of your ability.

Find the right people


Some general contractors are experienced with fixer-uppers, while others mostly work on new construction. You probably also need to call in some people who are more specialized in their work — plumbers, electricians, stonemasons, landscapers, and so on. As you’ll be working with all of these people to make the property shine, and they’ll be working together at least to some extent, try to find the right people for the job.

It’s up to you to decide who the right people are. Maybe you’re prizing speed over craftsmanship — which is absolutely fine; it’s your rodeo, and these are your clowns — but if that’s the case, then you probably would be wasting the luxury-home contractor’s time by asking for a quote. Be sensible about what you want to accomplish and then go looking for the specific folks who can help you get there.

Shop around for appliances and supplies


The big-box stores are always one place to find appliances, and the home improvement or hardware store may be convenient for supplies — but if you know where to look, you might find some excellent deals on the nuts-and-bolts ingredients for your fixed-up place.

If you know any other people who’ve worked on fixer-uppers in the area, it won’t hurt to ask them what they know about where to find good prices on high-quality appliances and supplies. You can also ask contractors, real estate agents, and other experts in the area to help you track down reclaimed wood or farmhouse sinks on the cheap.

Familiarize yourself with the neighbors …


You might not be planning on living in the property at all, but don’t make the mistake of thinking you can ignore the neighbors. They are going to be dealing with the noise, traffic, and possible inconvenience of your fixer-upper plans, possibly for months, and if you want a minimum of trouble, then it’s smart to introduce yourself early and explain what you’ll be doing and how long you’ll expect it to take.

It’s probably also a smart move to give them your email address or cell phone number and ask them to contact you if they’re experiencing any problems with the work you’re doing on the house. Just telling them where to complain and how to reach you can really help you avoid bad blood down the road.

… And any home associations involved


You don’t need to give the homeowners’ association (HOA) your phone number, but it is wise to at least familiarize yourself with the bylaws and restrictions of the HOA, if there is one. Those restrictions often govern things like additions, and some outline things like exterior paint color and landscaping requirements. What you don’t know can actually hurt you in this case, because the HOA can fine you as the owner for noncompliance with their rules, and that’s probably not another expense you want to incur if you can help it.

Know your permits


The HOA isn’t the only entity that cares about what you do with your property. Cities and counties usually have policies around what you can and can’t do, and for some improvements, you may need to get a permit approved in order to move forward. This is something best done on the front end, and some cities and counties are a lot slower (or more overworked) than others, so try to get it done as early as possible.

Know where and when to compromise


It’s rare in life to get absolutely everything you want, and that’s probably going to apply to this fixer-upper experience, too. Maybe your preferred carpet is too expensive; maybe the faucet and tap sets you were eyeing for the bathrooms have been discontinued. Maybe the improvement you want to make to the house is not permitted by either the HOA or the city or county.

Whatever the case, know that like anything else in life, this probably isn’t going to go 100% to plan — and that’s okay. Take some deep breaths and find the next-best thing. And if there’s something that you absolutely cannot compromise on, make sure everyone involved in making it happen knows that it’s do-or-die — and be willing to be flexible with everything else.

Prepare for the worst


No matter how much planning you do, and how hard you try to prevent it, things will happen to mess up your fixer-upper experience — for sure. Something might happen with a permit, or heaven forbid, your loan. Contractors could cancel on you, and it might be impossible to find another one. Buyers and renters are going to fall through.

None of that will be a traumatic, terrible thing if you remind yourself constantly to prepare for the worst. You don’t need to actually have eight contractors on standby, but come up with Plans B and C for every step of the process so that you’re ready to pick up the pieces and keep moving toward your goal when something inevitably does go wrong.

Shore up your emotions


There’s a reason why it made a ton of sense for a network like HGTV to go big on fixer-upper content — there’s a lot of emotion involved in fixing up a house, and nothing makes compelling reality television like heightened emotions. Between the elation of closing on the house, the daunting exhaustion after day after day of work (and still no apparent progress), the frustration of plans falling through, the satisfaction of a finished improvement, and every other feeling in between, it’s an activity that sometimes runs the full spectrum of human emotion. 

Be prepared for the potential to feel overwhelmed by how much you’re feeling — then remind yourself of the reasons why you got into this fixer-upper to begin with. Whether it’s making a profit and building wealth, generating some extra monthly income, or simply wanting to live in a house that’s nicer and brighter than the one you bought, your core reason to buy a fixer-upper will help guide you across the finish line.

13 Questions About Home Inspections, Answered

If you’re not familiar with home inspections, then you might have a lot of questions about what gets inspected, how thorough the inspectors are, why you even need one, and what you can expect if you’re walking with an inspector through the house you’re hoping to buy.

There’s a lot to know about home inspection, and your questions deserve answers. Here they are!

What is a home inspection?

A home inspection is an event that is basically exactly what the name implies: A home inspector walks through the home, looking at specific elements and features of the house, and then provides a report about anything that needs to be repaired.

Why would I want a home inspection?

An inspection is a good idea anytime you want a full rundown on any issues or problems with your house. If you’re already living there, it’s a lot less necessary than if you’re buying the home — when you will most definitely want an inspector to check for any potential red flags. They’ll be your problem after closing, and big issues can sometimes affect the insurability of your house (which, in turn, affects your loan eligibility), so home inspections are most common after an offer is made on a house but before the closing finalizes the deal.

What does the home inspector look at?

There are six essential parts of an inspection that you can expect every inspector to hit. They are the roof and attic, the basement and foundation, the plumbing, the electrical setup, the heating or air conditioning systems, the interior of the house, and the exterior of the house.

Depending on where you live and what common problems tend to manifest in the homes, you might also want to think about hiring a pest inspector, a sewer line inspector, or even ask about an engineering report to evaluate the home and plot’s structure and stability.

And in areas where radon is prevalent, or where there’s a lot of humidity, you may also want to ask about radon or mold testing (some home inspectors do this as an add-on part of the package).

How much does it cost?

The price of the home inspection is going to depend on the size of the house. You can typically expect to spend around $300 on a home inspection, but smaller properties (less than 1,000 square feet) might cost only $200, whereas larger homes (more than 2,000 square feet) cost upwards of $400 to inspect. Ask an inspector or a real estate agent in your area what they usually cost to get a closer estimate.

Do you need an inspector for a new house?

It’s always a good idea to get a home inspection — even in a brand-new house. You don’t want to find out there’s a problem after you move in, and an inspection is the best way to figure that out. So follow the “trust, but verify” process with your builder: Trust that they did their very best to get your home in the best condition possible … then verify that they did just that with an official inspection.

Who licenses inspectors?

Home inspectors are licensed by each state, and there are slight differences in how they are certified and how they maintain their license from state to state. Your real estate agent should be able to explain the policies in your state, or point you to where you can find them.

Should you attend the inspection?

It’s usually a smart idea for the buyer to attend the inspection in case they have questions for the inspector or want to follow up on any notes the inspector makes. Many inspectors today use new technologies that allow them to include photos of any issues or potential problems, but there’s nothing like being there in person to better understand exactly what’s wrong and how to fix it.

What happens if a problem is uncovered?

If everything is not in good shape with the home you’re about to buy, there are options. Usually when this happens, the buyers and the sellers start negotiating again — this time, to figure out who’s going to pay for the necessary repairs. Buyers might be able to ask for some money to be knocked off the final sales price to accommodate for the problem, or sellers might decide to go ahead and fix it before closing. If everyone can come to an agreement that suits everybody, then the sale can move forward.

Can you get out of a contract if a problem is revealed?

Most contracts to buy a home have an inspection contingency, which is hugely important for the buyer. The inspection contingency stipulates that the buyer can bow out of the contract if there’s a big problem uncovered by the inspection, which typically motivates sellers to make sure everything is in good shape. So you’re not necessarily locked in for life after you make an offer and it’s accepted; make sure you talk to your agent about inspection contingencies.

In most cases, the inspection contingency in the contract will give you an out if you need it. 

What else does the inspector look at, if anything?

Home inspectors are going to keep an eye out for any modifications to the house that were made since the last time it sold and make sure that the owner filed the appropriate permits to make that modification.

If the inspector finds an unpermitted change or tweak to the house, that could also cause a problem with the deal, so it’s always a good idea to obtain permits for any changes you want to make to your home if they’re necessary in your city or county. That’s not something you want to scramble to do before closing!

Can you use the inspection to negotiate on the sale?

Yes, absolutely! Buyers make their offers on homes with the understanding that there may be some minor problems here and there, but that the home is generally in good enough shape to be sold. So depending on what the inspection uncovers, buyers can either ask for the sellers to fix any problems, or they can request that the sales price of the home be lowered to account for the flaws and tackle the issue whenever they take ownership.

What isn’t included in an inspection? 

Inspectors are good — they catch a lot of problems with homes, and they’re usually locally focused enough to know exactly what to target — but there are some home features and extras that aren’t included in a home inspection. If it’s important for you to get an additional expert on the scene to check something out, it’s better to know upfront.

Home inspectors typically do not look at:

– Termites or pests
– Television antennas or satellite dishes
– Detached structures — garages, sheds, chicken coops, outdoor saunas, and so on
– Well and septic systems
– Lawn sprinkler systems
– Local code compliance
– Kitchen appliances
– Central vacuum systems
– Fire or smoke detectors, or fire suppression systems
– Alarm systems
– Hot tubs or swimming pools
– Environmental hazards (asbestos, lead, or radon, for example)

So if you’re concerned about one or more of those with the potential home sale in your life, you may need to hire one or more additional inspectors to make sure everything is as it should be.

How can an inspection affect your ownership?

The biggest way that an inspection might affect your ownership of the house, apart from negotiations between buyer and seller, is with the homeowners’ insurance. If you have a mortgage loan, then you must have homeowners’ insurance on the house — the lender wants to make sure that the asset is protected. (And even if you don’t have a mortgage loan, it’s usually a good idea to insure your home, anyway.)

Not every homeowners’ insurance company requires a home inspection, but it’s become increasingly common in recent years. If you can’t provide them with a recent inspection that shows no major issues with the house, then you might not be able to secure insurance, and that could be a big deal if you need it for your loan.

18 Secrets No One Tells You About Buying A House

Most homeowners aren’t shy about telling you how awesome it is and all about the perks of living in a house that they own … but they’re a lot less forthcoming about the ugly aspects of buying a house and the sacrifices you make.

And yes, there is ugly, and there are sacrifices. Here’s what nobody is telling you that you might need to know about buying a house (especially for the first time).

You don’t need to put 20% down

In most cases and with most lenders, putting 20% down is ideal or even required. But this isn’t always true. For example, the Veterans Administration (VA) offers loans for veterans that don’t require any down payment money at all.

Other loan-backers, like the Federal Housing Administration, will allow loans with only 3.5% down, but buyers have to pay mortgage insurance on those loans. They’re riskier because the buyer has less equity in the home, so buyers can expect to pay a percentage of the loan amount in mortgage insurance over the lifetime of the loan. (Or refinance the loan once they do have at least 20% equity in the home.)

There is down payment assistance available in both loans and grants, so it helps to talk to a real estate professional (like an agent) and see whether they know of any programs that might help you secure more money down.

… But you do need to put any new credit line plans on hold

Your mortgage rate is going to depend in part on your credit score, and your credit score is going to get dinged with every new line of credit you open before buying a home. So to get the very best deal on your mortgage loan (and potentially afford more house), make sure you’re not going crazy with new credit cards right before you start shopping — and definitely don’t buy anything like a yacht or car on credit!

You’re not locked into one particular lender

Some people think they should immediately dive into a relationship with the first lender that accepts them and offers to back their mortgage loan. But here’s the problem with that strategy: There may be a better match out there for you, and if you don’t shop around a little bit, then you aren’t going to find it.

Talk to a few different mortgage brokers and ask them what their best deal is. Your credit won’t get dinged by this, so please feel free to explore your options! 

Your monthly mortgage payment includes more than just the loan payback

Every month, you’ll be paying back your mortgage loan — that much you probably figured. But of course, there’s also the interest on your loan (which under many contracts gets priority for repayment above the loan principal). And you’ll also be paying homeowners insurance, which is required for the lender to approve the loan, plus taxes, every month.

If you’re not sure how much you can afford based on all of this, it’s probably not a bad idea to sit down with a mortgage broker (or five — see above) and talk about your options.

… So the mortgage amount on portals is not necessarily accurate

It’s tempting to look at the “average mortgage amount” on a real estate portal and take it as gospel truth, but often those are based on a loan with 20% down and usually don’t include the insurance or the taxes. Talk to an expert to get a good sense for how much you’ll expect to pay every month.

School districts are important even without kids

If you don’t have kids or don’t plan on having any, then you might be tempted to ignore the school district when shopping for a home — what’s it matter?

School districts definitely could be very important to buyers a few years down the road when they decide to purchase your house. And homes in neighborhoods with good schools tend to appreciate in value faster than homes in neighborhoods where the schools are just so-so. Make sure you’re considering your future as you’re shopping, which includes your future after this home.

You don’t need to spend your entire pre-approval amount on the home

It’s tempting to buy at the very top of your preapproved price range, but remember that you’re going to have to pay interest on the entire amount over many years, and don’t forget about the other costs of owning a home.

Financial experts suggest that you spend no more than 30% of your household income on your mortgage, so if the amount you’re spending is creeping beyond one-third of your household income, that could be tough to meet. So don’t overextend yourself!

You’ll look at homes out of your price range (and crave them)

It’s only human nature to look at things you can’t have, and that goes for housing, too: You will not be able to refrain from looking at homes just above your ideal price range and thinking about how nice it would be to buy that house instead of the disappointment you walked through last week.

But what’s worse than living in a house that you might need to fix up a little bit? Living in a really nice house that you can’t afford and having to sell it — or worse, go through a foreclosure. Look if you must, but don’t let it influence your decision-making.

You may get outbid, more than once

Some markets are hotter than others and have more cash buyers, which can be devastating if you’re using a loan and don’t have the wherewithal to pay cash for a house. Sellers often opt for cash buyers because the closing process is less cumbersome, and it can be hard for buyers to experience bid after bid rejected by the seller.

Stay strong and have faith that your house is out there. It might not be a smooth road, but you will get there.

Agents get paid on commission

Real estate agents typically don’t get paid until the closing table, when the house is officially yours. Then the seller will cut the agent a check. This is because agents are paid on commission: They’re taking a percentage of the sale.

If you have an agent who isn’t upfront with you about how payment works — or worse, one who is trying to talk you into more house than you can really afford — then it’s not a bad idea to question whether your agent is really the best fit for you. You want someone honest who will protect your interests, and that’s not too much to expect from an agent.

Talk to a contractor before closing

The inspector might identify some issues that need to be addressed, and usually this is negotiated with the seller, but to be entirely sure that you understand what will be involved and how much it will cost, it’s a good idea to hire a contractor and go over the inspection report. Some contractors offer free consultations, and most will be able to give you a ballpark figure to use as a jumping-off point for negotiation.

Speaking of closing: Introducing closing costs!

It costs money to close on a house, and closing costs can be picked up by the buyer, the seller, or both. This is usually outlined while negotiating the contract, but if you didn’t pay close attention to those terms, then it might sneak up on you. Clarify with your agent and mortgage broker who is responsible for closing costs and make sure you’ve got the money available if you’re the lucky winner of that responsibility.

Your mortgage will probably be sold to a servicer

After all that time looking for the right mortgage broker and lender, you may feel like it’s destiny, but the reality is that your lender probably doesn’t feel the same. Most lenders sell mortgage loans to a servicing company, which will be the entity collecting your checks every month for the next 30 years (unless the gets sold again, of course).

Be prepared for an announcement that your loan has been sold to a servicer and ready to cancel any checks or payments that slip out the door at the wrong time. It’s unfortunate, but it does happen, and you don’t want to pay your mortgage twice in one month.

Parking isn’t always guaranteed

There may be a space with your condo, and perhaps you have a garage or a driveway, but if you live in a major metro area or have several kids of driving age (or roommates, for that matter), then it’s possible you might have a struggle with finding parking.

This is information that’s usually included in listings, and it might also help to ask agents about parking situations in different neighborhoods. Street parking might work fine, but it’s usually a good idea to know how scarce or ample it is at the very least.

You’ll need to buy furniture

Maybe you’ve bought all of your furniture at antique stores, and it just doesn’t look right in your new mid-century modern home. Or perhaps you have several more rooms to fill than you did before. Whatever the case, be aware that you’ll have some purchases to make on the furniture front, and budget for them if you can — and definitely do not buy a bunch of furniture on credit before the loan closes, whatever you do.

You’re on the hook for any home repairs

The nice thing about renting is that when something breaks, the landlord will theoretically be by to fix it, or send someone, sooner or later. You don’t need to worry about how much the new sump pump or sewer line costs.

But all of that burden becomes yours and yours alone when you become a homeowner. The drain is clogged? The water heater won’t heat water? If you don’t fix it, or arrange for someone else to fix it, then it’s staying clogged and cold.

Those nearby empty lots won’t be empty forever

Everything changes, and some places change more quickly than others. Almost nothing gets a neighborhood riled up like the words “new development” or “strip mall,” and you cannot take it for granted that the rolling (empty) hills around your brand-new pride and joy are going to remain empty, unless you happen to own all the land, too.

It’s not a bad idea to stop in at your city or county offices and ask what they know about any development plans or zoning for the area, and then keep tabs on things once you move in. Better safe than sorry and surprised, right?

It might take a while to feel like “home”

You’d think that once you’ve gone through all of this trouble for a house, it’ll automatically “feel” like yours … but that’s not necessarily true. It may take a few weeks or even months before you start settling in and feeling like a homeowner.

So if the words “this is my house” don’t roll off your tongue quite like they should in the beginning, take heart: You’ll be claiming it without thinking about it before you know it.

4 Questions To Ask Before Buying A Home

Do you want to buy a home? (No, that isn’t one of the questions.) If the answer, however, is “yes,” then there are more questions you’ll need to ponder before you’re truly ready — even if this is your fifteenth fix-and-flip instead of your very first home.

Before you start adding properties to your “favorite” list on your most-visited real estate portal, consider the many possible answers to these questions and then decide what’s best for you. Even if you enjoy making big decisions by the seat of your pants, you’ll find that a little bit of thinking and planning before taking the (huge!) step of buying a home will give you confidence that you got a good deal … and the ability to find a place that’s absolutely perfect for you.

What do I want?

Homes don’t just come in the single-family residence flavor — you can buy a condo, an apartment, or a duplex, for example, and it’s possible that one of those options makes more sense for you and your lifestyle today than a single-family home would.

Homes also aren’t built in isolation. There will be neighbors, traffic, weather, and many other factors and features beyond your control.

What’s an ideal level of neighborhood walkability for you? Would you prefer to be close to your gym or yoga studio chain, or a hiking trailhead? What kinds of schools or pet facilities are nearby? Is the area close to any large cultural or sports centers? What’s the crime rate like? What’s the commute like, and is there decent public transportation? Are any or all of these things good or bad for you, personally?

Only when you’ve taken time to thoroughly think about and narrow down the type of home and the area where you want to buy should you start thinking about other aspects of your dream home — like the finishes, the size of the kitchen, and whether it has a big back deck or a gas range instead of an electric stove.

Some of those preferences will be just that, and some will be dealbreakers. If you’ve got a large-breed dog and really require a big backyard, it’s okay to put that on your “must-have” list — but try to keep that list significantly shorter than your “nice-to-have” list. You might be surprised by how your preferences shift once you begin actually looking at homes available on the market, so it’s good to have some kind of idea of how important each home feature is to you and your lifestyle and also know where you have a little room to compromise.

It’s smart to keep your options open at every stage of this decision-making process. If you don’t have a friend who lives in the type of house and area that you’re eyeing, it might be a good time to connect with a local real estate agent. They’ve helped people just like you buy a home before — and they might know about perfect neighborhoods that aren’t even on your radar, or which items on your must-have list are easy to implement yourself if a home doesn’t currently have it.

What can I afford?

Financial experts typically advise that buyers spend no more than 30 percent of their total monthly income on housing. Another rule suggests that you spend a little more than double your annual income on a house. 

Your mortgage payment is going to cover not only the cost of the home itself, but also interest on the mortgage loan, homeowners’ insurance, and property taxes. And depending on the size of your down payment, you may also need to pay private mortgage insurance on your loan, too.

You can look up property tax information by county; it’s calculated as a percentage of the home’s value, so property tax can shift up or down depending on the housing market, but don’t count on it staying steady for the 30-year duration of your loan.

A local insurance agent can also give you a good idea of what you’ll be paying for homeowners’ insurance on the property. And this is an area where you might actually be able to save a little money elsewhere — if you have a car, you often will receive a discount for packaging your auto insurance and homeowners’ insurance with the same carrier. You might also want to consider some ancillary insurance, like flood or earthquake insurance (and flood insurance is required on some homes).

The mortgage interest rate is going to depend on a few factors — your current credit score and the current market mortgage rates. A loan officer can help you figure out what your current options might be and may even offer suggestions for how to improve your credit score to get a better rate while you’re saving up for that down payment.

Speaking of the down payment: Don’t forget that whatever you bring to the table will be applied to the home sale amount, so you probably won’t be asking for a loan that’s the exact price tag of the home. For example, if the home you want to buy costs $200,000 and you have $40,000 (20 percent) to put down on the home, then you’ll be borrowing $160,000 from the bank instead of the full $200,000.

There are online calculators that can help you assess some of these factors, but again, here it’s smart to talk to a real estate agent. An agent can also refer you to a local insurance agent and loan officer so you can start figuring out what you need to do to become a real-deal homeowner.

Am I financially prepared?

This is a tough question to answer, and it’s one big reason why you might want to start talking to real estate professionals early on in the process — there’s a lot you can do to help make this purchase one of the smartest financial decisions of your life, and most of it happens before you start dreaming up that perfect place to live.

If you aren’t already connected with a loan officer, start here. These people are experts in the different types of loan available to you and how you can optimize your financial standing to give you a great jumping-off point.

You may need to do some work on your credit score before you can buy, and a loan officer can also hook you up with an expert who can comb through your credit report and tell you which debts to pay off first as well as lay out a six-month plan for polishing everything until it’s shiny.

And while you’re working on your credit, do yourself a favor and look up what down payment programs might cater to your situation at a website like www.downpaymentresource.com. Depending on your age, state of residence, whether you’re a first-time homebuyer (it still counts if you’ve reverted to renting for several years!), and a few other factors, you might be eligible for free money that can only be applied toward a down payment on a home. Some programs supporting responsible homeownership require recipients to attend a few classes about buying a home and how to pay off a mortgage — but that’s time well spent if the payoff is four to five figures of cold, hard cash to put down on a home.

When you feel as financially robust as possible, ask your loan officer to pre-approve you for the loan amount you can afford. This will make it possible for you to immediately place an offer on a home if you find one that you love instead of waiting for lender approval … and you’ve already gotten through the hard part, so you might as well make it official, right?

How do I make the best bid possible?

There’s nothing like jumping through all of these hoops — not to mention the home search process — only to place an offer on a home and discover that you were outbid. Or, on the flip side, that you could have offered less and still been successful!
This is where a real estate agent becomes truly valuable in the process; they’ve seen offers that flew and offers that flopped, and they do this every day. If you’re not working with an agent yet, find one and ask for some data about homes sold on the same block (ideally) or in the same neighborhood that are a comparable size, in comparable condition, and have comparable features.

An agent can also help guide you if you’re about to make an offer that’s bound to be rejected because it’s too far below market standards — or if you might be able to get a deal because a home has been languishing on the market for longer than normal and the sellers are reducing the price weekly.
And a good agent can also help you regroup and get back in the game if the offer on your dream home is rejected.

Sometimes a seller considers list price to be a jumping-off point in negotiating a final sale — and sometimes that list price is set in stone and the seller isn’t going to be moved. Your agent can give you a feel for whether you really were offering a number well below market expectations or whether it’s more likely to be a seller’s inflexibility.

When you can answer the first three questions confidently, it’s time to start searching for a home — and when you can answer the fourth effectively, you’ll be walking away from the deal with keys to the front door in your hand.

4 Questions To Ask Before Selling Your Home

There comes a time in every homeowner’s life when he or she realizes: “I am not the same person I was when I bought this place.” Maybe your lifestyle or your family configuration has changed, or maybe the house just isn’t as appealing as it was when you signed that ream of paperwork on closing day.

If you’re thinking about moving on, then there are a few questions you need to ask yourself before you take the plunge and list the house. When you can answer these questions, you’ll know you’re in the right place emotionally and financially to move on to your next space.

What is my home worth?

You can find almost anything on the internet, and that includes an estimated value of your home. How convenient!

But before you go galloping off to Zillow or Redfin or even a brokerage website to try to figure out how much your house is worth, take a deep breath and resolve to remember one thing: “I shouldn’t believe everything I read on the internet.”

It’s possible that an automated estimate is going to be spot-on, but those algorithms depend on numbers that might or might not be accurate, like the condition of your property, the square footage, any features or amenities you’ve added (or removed), and recent sales of properties nearby that could be comparable to your own home.

A better way to figure out how much your home might be worth is to look at your most recent property tax bill. Your property taxes change with the value of your home, so if you look at your property tax rate from last year and figure out your state’s assessment rate (usually not quite the total value of your home — it’s somewhere between 80 percent and 90 percent of the home’s total value, depending on the state), that can help you get a little bit closer in terms of pinpointing price.

You can also talk to a professional about your home’s value; a real estate agent who sells properties in your neighborhood every day is going to be able to give you a more accurate idea of how much your particular, specific home might capture on the current market.

And a real estate professional can also explain what you can do to your home to help inch that number upward a little bit. Then you can make the call as to whether or not you want to make any upgrades or take the estimated price as-is. Which leads to the next question …

How can I sell at the highest price possible?

When you’re selling anything, you want to get fair market value for the item you’re releasing, and that’s exponentially truer for your house, which is probably the biggest purchase you’ve ever made.

If you know your neighbor’s house sold for ten figures more than the highest estimate you’ve been able to find for your own home, that can be a tough reality to swallow. But this is where real estate professionals really earn their keep — they can explain why that house was so desirable (maybe if you’re honest with yourself, you can admit that your neighbor’s view is much nicer than yours, for example), and they can also show you where you do have some room for (price) improvement.

If you don’t want to call in a professional, then start with things that can spruce up almost any dwelling. One of the first and most important steps to selling your home for top dollar is to get the place deep-cleaned from floor to ceiling, including washing the windows and scrubbing down all of your kitchen appliances.

Start by attacking the clutter; it’s much easier to clean a room that doesn’t have a lot of furniture or objects in it, so even if you’re hoping to move up to make space for all your stuff, it’s a good idea to start cleaning out the items that you know you don’t want to move with you. If there’s still a lot left, consider a shed or an off-site storage facility where you can stash things without packing it all in your closets (where buyers are most definitely going to be looking). If you have a junk drawer or even a “junk room,” now is the time to start corralling that beast.

Then get cleaning. There’s no detail too small — make sure every room in the house sparkles to the best of your ability and smells fresh and aired-out.

There may be quite a few additional projects you could tackle to increase your home’s value, such as adding a deck, remodeling the kitchen, or even adding entire rooms in some cases. Those are good opportunities to discuss with a real estate professional, who can share feedback about whether the project is going to be worth the eventual return on investment when you sell the home — and what projects will net you more money for your property.

Real estate agents also know stagers and home photographers. When a buyer falls in love with your home, it’s most likely going to be from an online listing, so your listing photos should be as high-quality as possible — that might mean bringing in a stager to spruce up the rooms and a photographer to capture the results.

How long will my home be on the market?

No one can predict the future, but experts who work in the industry can usually come close. If you haven’t called an agent yet, you might need to in order to get the information you’ll need to answer this question.

Ultimately, it depends on what the housing market is like in your area, but there are a lot of anomalies within a housing market — even in markets that seem red-hot, sometimes sellers make a mistake and overprice a home that then languishes for weeks or even months longer than more realistically priced homes. And there are some neighborhoods or even specific blocks where buyers seem to be willing to do just about anything to get their foot in the door — and other geographies where they might need to be lured in a little more aggressively.

The number of days that homes stay on the market gets shorter and shorter as housing heats up, but that number is absolutely contingent on the initial list price. Homes that need to reduce their prices to attract qualified buyers will remain on the market significantly longer than homes priced competitively from the start. It’s really important to get the initial list price right if you’d like the home to sell quickly. (And remember: The longer that house takes to sell, the longer you as the seller will be responsible for keeping it in showing condition for buyers — seven days a week.)

So even in markets where houses seem to be flying off the shelves, it’s smart to talk to someone who sees those sales up close and personal every day. They can give you an educated estimate about the amount of time it should take your property to get from list to close.

How can an agent help?

Selling a home is a huge life event that encroaches on just about every aspect of your existence, from your meals to your work schedule to how often you do laundry and vacuum up pet hair. It can be an incredibly stressful time, and a real estate agent is a personal advisor that can help sellers make the best decisions possible while keeping track of all the details.

A good real estate agent will help you find the best price for your home, list it for you on the MLS, and handle all the marketing — from photos to open houses to glossy brochures to Facebook ads. A good agent can manage your showing schedule for buyers who want personal tours and can help you decide which offer to accept if you happen to receive more than one … and a good agent is absolutely essential during the negotiation process, especially if the buyer is making demands that the seller isn’t prepared to address.

A good agent will also know the best plumbers, electricians, and general contractors in the area who might be able to make any repairs or changes to the home before it closes. He or she can manage the transaction timeline, alerting you when an inspection or appraisal is about to happen and keeping you in the loop regarding financing and every other aspect of the deal.

A good agent can also help you do all of this while you’re simultaneously looking for a new place to live and can help you manage that, too — including what to do if you find a home before your current house sells.

And depending on your personal situation, there are local real estate agents who specialize in divorce, estate sales, and other tricky life events involving a home transaction.

Selling a home is as simple as listing it on the MLS and waiting for an appropriate offer to come in — but there’s so much more involved that most sellers can’t handle it on their own. Answering these questions will get you a head start, but don’t skip talking to an agent or three when you’re actually ready to list that home; they’ll be able to point out what you didn’t know you were missing.

16 Common Mistakes That First-Time House-Flippers Make

When you binge-watch a little too much HGTV, it’s easy to come to some crazy conclusions. Conclusions like, “House flipping looks easy! I should try it!”

Well, maybe you should — we sure won’t stop you! — but before you jump into your very first home flip, make sure you know what common mistakes first-time flippers are in danger of making so that you can avoid the same fate.

Not having the finances

Before you flip a house, you have to buy it. Depending on whether you’re paying all-cash or getting a mortgage loan (and whether you already own a primary residence or not), you will have to secure a down payment for the home, plan on paying mortgage interest for the months that you carry the mortgage, pay for utilities, and pay for the expenses of actually fixing up the home.

You might be tempted to assume that this will be a quick and easy project, but similar assumptions have taken down more experienced house-flippers than you. It’s much better to overestimate how long it will take then to underestimate — that way you can make sure you have enough money to cover the flip.

One money-saving tactic could be to move into the house while you renovate it (then you won’t be paying rent elsewhere). Be warned, though, that unless you live in the home for two years, you will still have to pay capital gains tax on any profit made from the flip.

Buying the wrong property

Like Goldilocks, you want a home that’s “just right” — not too expensive, or you won’t make any money, and not in too bad of shape, or you’ll spend more than you planned to fix it.

Paying too much for a home is one of the worst things you can do as a house flipper, so it might help to secure some real estate expertise from a local professional who can give you a good idea of what fair-market prices look like and help you ascertain if your offer looks good or if you want to seek out a better deal.

Additionally, a professional can help you understand how much profit you could potentially make, which is also easy to overestimate as a first-timer. And they can make sure you’re following the 70% rule. What’s that? Well …

Not following the 70% rule

Most fix-and-flip investors who have been doing the job for a while know and adhere to this rule. It’s not very complicated, but you may be tempted to indulge in some creative math to make the numbers work — resist! That’s a form of rule-breaking.

You do not want to pay more for a property than 70% of its fixed-up fair-market value.

So in other words, if you’re eyeing a home, and you have it on good authority from several people that after you fix it, you could sell it for $200,000 — do not offer more than $140,000 for that home. That is your 70% threshhold.

This will give you wiggle room to pay for the repairs and upgrades and to still make a profit.

Forgetting to make the budget

Are you getting the idea yet that flipping a home is a big exercise in math? Well, if you haven’t started laying all these costs out in a spreadsheet and figuring out what you can spend where, then start.

You’ll want to consider both the cost of the home (either paying for it outright or paying the monthly mortgage plus insurance, taxes, and any other expenses), the costs of the upgrades, the amount of time those upgrades will take, and the time on market once it’s ready to sell.

Again, a real estate professional (or another experienced house flipper) can give you a solid ballpark for all of these metrics if you don’t even know where to start.

Not getting an inspection

When you’re paying cash and you’re in a hurry — and you already know there’s a lot to fix in the home — then it can be tempting to skip the pre-sale inspection. Why bother?

Because that inspector might find a serious problem that’s going to cost you more to fix than you can afford. Foundation or structural issues are usually not cheap to solve and can eat up most (if not all) of your budget if they emerge unexpectedly.

Plus, when the time comes to sell the home, you’ll know that everything was done to get it into perfect condition if you bothered with an inspection!

Not securing the right permits

Before you start pulling out the sledgehammers for demolition, it’s a good idea to ascertain which permits you’re going to need for your upgrades. You don’t want to do all the work on a project only to discover that you needed a permit and might need to redo some or all of it.

Again, a real estate professional or someone who’s flipped houses before can help you here. They will have an idea of what permits are needed and can help you start the application process before you need them (not after).

Multitasking

When it’s time to actually get started on the work, you may be tempted to flit from project to project so that you can feel like you’re accomplishing something. Why continue working on that item that’s going to take a week to finish when you can just run over and finish two or three things really quickly?

If you’ve read anything about research on multitasking, then you already know the answer: It makes you much less efficient than if you focused on one thing and saw it through to the end.

Make a list of things that need to be done, and if you want to feel that sense of accomplishment, then plan to spend your morning working on major projects, and your afternoon on little items that help you feel like you’ve finished at least one thing.

Overestimating what you can do yourself

With the existence of YouTube, it’s pretty tempting to think that you can do anything with the right tools and a video.

But this is a major investment, and you are probably not qualified to do most of it. Putting a wall up or refinishing a floor? Sure, maybe. Any plumbing and electrical help will definitely require a professional, though, and you might want to consider finding a general contractor who’s willing to pitch in where you need.

If you have direct experience making a specific type of home repair, and you liked your results, then go ahead and assume you could do it again. If not, then for your first flip, hire a pro and watch them work so you decide if DIY might be an option — next time.

Not playing well with others

No flipper is an island, and that is especially true for first-time flippers, who haven’t yet discovered their core crew of people who can help them get the fixes in, and in quickly. You’ll need to rely on strangers to help you finish the job, and some people are better at doing that than others.

If you don’t deal with feedback well, don’t manage relationships well, or just generally don’t like working with people, then you should perhaps reconsider this method of money-making. You’re going to need to work with others, and work well with them; if that’s beyond your scope of ability, then maybe funding a flip and collecting some of the profit is a better choice.

The good news is that if your first flip goes well, you’ll be on your way toward building a crew for future flips.

Running out of time

You’re almost to your sales deadline, but the house is only half-finished. This is a real nightmare for a flipper, but it’s a common one when it’s your first flip and you have no real idea how long the fixes are going to take.

Overestimate how long you’ll need to finish the job, especially if you’re working by yourself. Leave yourself time to undo and redo some work (because you’ll probably mess something up), and don’t create a timeline that’s going to squeeze you beyond your abilities.

Don’t know how long it’s going to take? Bring in a general contractor and ask for time estimates. Add 50% or double the time on any jobs you plan to do yourself if you’ve never done it before.

Remodeling according to your personal taste

Many first-time flippers forget that they aren’t renovating the house for themselves — they’re doing it for a future buyer. And those flippers end up getting less for the sale than they could have because they insist on revamping the house according to their own personal taste instead of what sells best on the market.

A real estate agent can help give you a reality-check here and tell you that your preference for a separate kitchen, dining room, and living room is going to hurt the sale, or help you understand whether there’s really a demand in the area for a garage with a rock-climbing wall installed.

Neglecting the little fixes

There’s a lot to do in any flip, and it can be tempting to focus on the big items — floors, walls, windows, doors, and so on — and ignore the little ones.

But if you think that buyer isn’t going to notice that the kitchen drawers all stick, you’re delusional. Change the light bulbs, oil the hinges, and make sure everything (everything!) works and works well before you call it a day.

Upgrading too much

Depending on the neighborhood, a five-burner gas-range stove might be exactly what the house demands … but maybe not. First-time flippers often don’t know where to stop with the upgrades and do too much, creating a beautiful house that’s over-finished for the neighborhood, and installing features that buyers who are interested don’t really want.

That doesn’t mean you need to go for the cheapest option, but at least look at other listings in the neighborhood to see what the standard or “average” finishes and fixtures look like, then aim for that look. (This is another area where a real estate professional can be worth his or her weight in gold.)

Ignoring the outside

Well, the inside of this soon-to-be-flipped home looks amazing! Time to list?

Not quite. Have you paid attention to the landscaping? Put in new sod? Added flowerbeds to the garden, or otherwise improved the curb appeal of the home at all?

It’s a big mistake to focus only on the inside of the home and ignore the outside. A green lawn, fresh coat of paint, and some artfully placed flowers can work wonders on that final sales price.

Listing the house before it’s finished

You may think that you can show buyers what you’ve done and they’ll be able to imagine what the home will look like when it’s finished — but this truly isn’t the case. If you try to start showing the home before it’s actually ready, then all buyers are going to see is a half-finished project.

They don’t have access to the vision in your head. Don’t try to force them to create one, or the house will linger on the market for longer than necessary … and you’ll have missed your first, best chance to make an amazing impression with your flip.

Counting on the market to pull the price up

When the market is hot, it can be really tempting to hope that it will have escalated enough in the months that your flip was being renovated to bump up the sales price. We all hear the stories about how prices are rising, so why shouldn’t you expect them to rise while you work?

Because housing markets, like all markets, are subject to outside forces beyond your control that you cannot predict. If you’re counting on the market to grow, and that doesn’t happen — what’s your Plan B? Will you still make money on the sale, or will you lose your shirt?

Don’t risk it. Make sure that you can still make a profit even if the market doesn’t jump while you’re working on the house. (And if it does? Consider that a pleasant surprise.)

Staging without a pro

Many flippers are also great at staging homes, and this could well be you in the future. But for your first home, do yourself a big favor and budget for a stager from the beginning.

A professional stager will tell a story with the home, tying rooms together with color and texture, and helping buyers envision their lives in your flip. Watch and learn from the pro, and then maybe you can try staging on your second (or third, or eighth) flip.