So you are considering taking on your house as a fixer-upper property Nashville. Before you pick up a hammer and a saw, make sure you understand the true cost of a fixer-upper property in Nashville. In our latest post, we explore the expenses so you will know exactly what to prepare for.
Fixer-upper properties are a huge draw for both novice and seasoned investors. They can be an excellent way to achieve high ROI or you can customize and renovate in any way you see fit. While investors all over the country flock to these kinds of properties, it is important to have a grasp on the true costs you are likely to face. Below, we discuss these costs and how to plan ahead so you don’t find yourself in over your head.
Cost of a Fixer-Upper, Points To Consider
On average, homeowners spend over $1,000 on building permits. The costs vary depending on the project, but you can expect to pay a few hundred to a few thousand dollars depending on your location and the scope of the work being done.
Fixer upper properties can be purchased using an FHA 203(k) rehabilitation loan or a Fannie Mae Homestyle Renovation mortgage. These loans come with a reserve that is put into escrow in order to fund renovations. While these loans are great for bigger projects, they might be ideal when only small repairs are needed. You will face loan origination costs, a downpayment of around 5% down, you must have a credit score of 620 or 640 depending on the lender in the Nashville area, as well as any other administrative costs.
Obviously, the repair costs will need to be factored in before you buy. Kitchen renovations can be upwards of $20,000 but can vary widely depending on appliances, cabinetry, types of materials and more. Flooring can run about $5,000 depending on the type of flooring used and how much area you need to cover. A new bathroom remodel will run you at least $5,000 and any structural problems can end up costing tens of thousands of dollars. If repairs are in excess, you may want to just pass on the remodel or repairs and sell directly to an investor like Southern Homes Investments.
Those Hidden Surprises of a Fixer Upper
It is those gotchas that really clobber investors and homeowners alike. Every house has one, some have more surprises than others. So what are these hidden catastrophes? Renovation surprises can range from simple miss wiring or garbage disposal breaks after closing (my rental property last year) or a microwave that turns on and the wheel spins but no heat is emitted from it. (Happened to me on my last house inspection.) How can one catch that in the inspection? More severe issues abound like radon gas, asbestos in the insulation or popcorn ceiling, and mold. Foundation issues can be quick expensive or just a simple repoint. Lesser know defects can be easement issues like fences not on property lines or utility easements that are much larger than expected. Drainage can be an easement issue too. Sometimes HVAC ducking has to be cleaned or replaced because of contaminants or mold growing in the ducks. Every house is different and each has its own set of surprises waiting for the homeowner or investor.
How Much Should You Pay?
In the most simple terms, you should calculate the value of the home if it didn’t require any work, then deduct the cost of repairs. To calculate the potential value of the property in question, take a look at what other properties in the area have recently sold for. While these properties won’t likely be fixer-uppers, it will give you a good idea of your property’s potential. Once you have created a CMA for your property, you’ll need to evaluate your repair costs and determine if fixing up your house is worth the money you need to put into it, the amount of time it’s going to take you (time is money since interest is calculated daily), and worry.
Estimates Before You Start Demoing
Tour the property with your contractor to get estimates on the required cost of a fixer-upper. This will help to ensure the property you wish to remodel or renovate will be profitable for you in the long-run. A contractor will be able to see things you may not, ultimately saving you thousands of dollars down the road.
Padding Your Budget
Once you determine what you can pay and what the required real cost of a fixer-upper is going to set you back, you’ll want to pad your budget a bit to prepare for any surprises you may face. A good rule of thumb is to set aside at least 15-20% for unexpected costs. These costs can be for things such as extra repairs you weren’t aware of, more labor needed than previously thought, or extra permit or administrative costs that were not planned for. Almost every project goes over budget, but when you plan ahead, you won’t have to.
The Project Is More Than I Can Handle, Now What
Renovating a house is expensive. How to determine the real cost of a fixer-upper property is critical and if you feel the task is just too much for you, call us at Southern Homes Investments. We will be happy to talk to you about your home. You may just decide to sell it to us and not struggle with a remodel. Afterall it is a lot of work and money. We at Southern Homes Investments love making homes beautiful once again. Our work brings value and quality to the neighborhood while giving you cash to walk away. Call us today at 615-235-0612.
We help you understand the real cost of a fixer-upper property in Nashville. Get in touch with us today to learn more! (615) 500-4466
David Wright is a licensed real estate agent and this article is not a solicitation to list your house for sale.