By Seth Rothbard
Jan 13, 2013
Q: If someone is planning to buy a fixer upper, what advice would you give them before they do?
A: If someone is looking to purchase a fixer upper they should explore the option of getting a 203K mortgage. A 203K loan allows the buyer to roll renovation costs into your mortgage.
With mortgage rates being at an all time historical low, it makes more sense to finance renovation costs as opposed to using your own cash. Chances are we will look back in five years and never see these rates again.
I would also tell the buyer to do their homework on the work they will be putting into the home.
Make sure the neighborhood and market will justify the after repair value of work they will do to a home.
If all the homes in the neighborhood are selling for $300,000 and you purchase a home for $250,000 but it needs $100,000 worth of work or updates, be careful. There is a good chance you will never get that money back.
Lastly, I would recommend using a strong home inspector and never forgo a home inspection.
When buying a home that needs work there will always be issues and repairs that come up unexpectedly.
A good inspector can hopefully minimize those hidden issues.”