So you’ve found a fixer-upper for a GREAT price! It’s in a decent neighborhood, but it needs a lot of work. No problem, you can deal with that. How much work is too much work, though? You don’t want to buy into a project that will turn into a money and time sink. Nobody gets into real estate to lose money! So, how you decide what repairs are worth the investment, and which ones you should pass up, no matter what the price tag says?
What’s Your Goal?
First, you need to decide your goal with this fixer-upper. Are you buying it to fix and flip for a profit? Are you looking for a home to repair and rent? Which goal you’re pursuing will affect the amount of work and money you put in, and should be considered carefully during your calculations!
Fix and flip properties will require a larger investment because you’re tailoring someone’s dream home. These properties will require more extensive repairs and updates because a buyer will be much pickier than a renter.
You’ll want to replace major home systems if they’re damaged or aging, refinish hardwood floors, repaint inside and out, replace the flooring and carpet, modernize the bathrooms and kitchens, and update the fixtures, hardware, and appliances. This will represent a substantial investment, but if you purchase the property at the right price, these updates could return a nice profit!
Repairing a property for rent won’t require as thorough of updates because renters are typically less picky about fixtures, cabinet colors, tile, and appliances than a buyer would be. Also, you can adjust the rent for less updating completed, and increase it for more custom upgrades. Your goal will be to make the property attractive and safe for your future tenants without dumping a bunch of money into a home that will take months or years to return your investment!
For rentals, you’ll want to check the major home systems and replace any that are close to failure, just to save yourself the stress and 3 AM maintenance requests. Exploding water heaters will cause additional damage that could be avoided by replacing it ahead of time!
Replacing worn out carpet, repainting the walls a neutral color, updating hardware or fixtures, and exchanging damaged appliances are all perfectly reasonable investments in a rental property.
4 Things to Consider
Before you start wantonly signing checks, break out a calculator and do a little research! Yes, we know, that pesky calculator again. But you’ll thank us when that fixer-upper turns a tidy little profit because you took the time to check. Sound investment is all about research and preparation
- What’s the average property value of the area? Calculate the estimated costs of all your repairs and deduct them from the average property price in the neighborhood. For rentals, you will also need to allocate a percentage for vacancy and maintenance. For flips, don’t forget to calculate commissions, insurance and carrying costs!
- What does the area have to offer? This is important for both flips and rental properties. Excellent amenities will make a home much easier to sell or rent! Consider the local schools and businesses, job availability, entertainment and dining options, shopping, hospitals, and future construction.
- What’s the age of the home? This number will help you determine all sorts of things, from how desperately appliances will need replacing to whether you should anticipate code compliance issues or structural problems.
- What type of permits will you need? This is an important one that most folks fail to factor into their initial estimates! You know the home will need cosmetic work, but what kind of permits will the city and inspectors require you to have? How much will they cost? What paperwork do you need, and what are the time requirements for applications and approval?
What Does the Property Need?
Remember that these prices are estimates designed to give you an idea of the future expenses and will vary based on the quality of items that you choose. If you already have specific brands in mind, use those prices when making your calculations.
Don’t forget installation fees and any additional costs, such as pads or removal!
- Cost: $2-$5 per square foot for carpet and pad, plus installation
- Time: Typically two days
Hardwood costs up to three times as much as carpet! Refinishing is less expensive, and usually, a good option unless the floors desperately need replacement.
- Cost: Between $2,000 and $5,000 depending on the amount of floor space and the condition of the wood
- Time: Typically two days. You want to allow for several hours of drying time between coats! If you’re installing new floors, you’ll need to buy hardwood at least a week before installation and let the woods acclimate to the new surroundings. This is not a joke – wood fluctuates tremendously due to moisture!
Tile or Vinyl Replacement
Calculate the square footage by tile price, and don’t forget the subfloor will need to be assessed before laying any new flooring. Plywood typically costs $20-25 per 4’x8’ sheet!
- Cost: For tile, it can be as little as $5 to as high as $35 per square foot, including installation. Vinyl flooring typically runs between $3-$5 per square foot.
- Time: Bathrooms typically take a day, kitchens can take anywhere from 1-3 days.
Replacing fixtures will include lights, fans, chandeliers, door handles, faucets, and cabinet hardware.
- Cost: $1,200-$1,400
- Time: Allow yourself a full day to change everything out.
New Doors and Windows
These can significantly impact the curb appeal of a home and might also be necessary to meet code requirements or make the home more energy efficient.
- Cost: Exterior doors can run anywhere from $300-$1,200 depending on the quality and construction. These ranges reflect the door itself, necessary hardware or lockset and installation. Window replacement will depend on the type, size, and number of windows, as well as materials used and any necessary repairs. Homeowners, on average, can expect to spend around $5,000 for 5-10 windows.
- Time: Door replacement typically takes a few hours. Window replacement usually takes an hour or two per window.
This category includes hot water heaters, refrigerators, ovens, microwaves, dishwashers, washing machines, and dryers.
- Cost: Hot water heaters run between $800-$1,200. Refrigerators can run you from between $400 all the way up to $2,000. Basic stoves will cost you from $350 -$500, though pricey models can run well up into the thousands. A decent microwave will cost around $100. Dishwashers run from $200-$500. Washing machines and dryers can be picked up for $300-$500 apiece. Don’t forget to bargain shop and scour for gently used appliances to save money!
- Time: Allow yourself 2-3 hours for each appliance, and don’t forget to arrange disposal for the old units.
Kitchens are a huge selling point in a home. If you can get away with just repainting the cabinets in a neutral color, great! Refinishing and refacing are also cost-efficient options to consider. Replacing cabinets is an expensive undertaking, but sometimes necessary.
- Cost: Several thousand dollars, depending on construction and quality. Rentals can get away with standard cabinets, a home you plan to sell might benefit from custom work. Your budget will determine the route you take.
- Time: 4-5 days, which includes demolition, installation, finishing and cleanup.
- Interior – Calculate paintable square footage by price per gallon. Don’t forget tape, paint brushes/rollers/drop cloths!
- Cost: On average, $1-$3 per square foot. This generally does not include texturing or scraping popcorn.
- Time: This depends on the size of the house, available manpower, the extent of prep work, and the number of colors you’re working with. Allow yourself a week to do it properly, as the process will include trim, doors, and molding.
- Exterior – Multiply square footage by the price of exterior paint. Calculate preparation times, such as scraping old paint off and prepping the surface. If the paint is lead-based, you’ll need to hire a painter or contractor who is licensed to remove the old product.
- Cost: Pricing will depend on the size of the home (square footage and number of stories) but on average, expect to spend between $2,000-$3,000 for a professional. To do it yourself, expect to pay between $30-$70 per gallon. Double up, because you’ll need two coats.
- Time: Allow yourself a week, and watch the weather closely!
These are best left to a licensed professional!
- Cost: A professional electrician will cost between $50-$100 per hour for labor, plus the cost of any supplies and service call fees. Installing outlets or additional fans can cost a few hundred dollars. Rewiring an entire home can cost upwards of $10,000.
- Time: This will depend on the complexity of your project and can be estimated by hiring a professional for a quote.
These are best left to a licensed professional!
- Cost: Professional plumbers can cost you anywhere from $50-$150 per hour.
- Time: Jobs like installing toilets and dishwashers or fixing plumbing leaks typically take a day. If you have more complex requirements, such as slab leaks or plumbing new additions, you’ll want to get a quote.
If you suspect the home has foundation issues, call a structural engineer in to assess the damage BEFORE you call a repair company! You want to know exactly what you’re dealing with so the work estimate can be as precise as possible!
- Cost: Simple repairs for minor cracks run as low as $500 while complex work such as major foundation repair can include replacement of every pier. This varies per geographic area, but often runs $175-$400 per pier. Pricing will depend on the type of foundation. Also, consider the structural damage that happens inside the home as a result of foundation issues and the resulting expense of those repairs.
- Time: When it comes to foundation repair, you want correct work, not quick work. Expect anywhere from a few days to several weeks. Again, this is definitely something you’ll want to get a quote for.
Anything beyond simple repairs is best left to a licensed professional! Repair costs will depend on the extent of damage and type of roof you have.
- Cost: Between $100 and $1,000 for minor repairs such as patching or replacing flashing. Shingle installation varies and decking replacement may be separate!
- Time: A few hours, for simple repairs, up to a couple days for a complete replacement.
Is The Property Worth The Price?
Now that you’ve crunched your numbers, how does everything come out in the wash?
Is it a good investment? Awesome! And now you’ve got a checklist already drawn up for the repairs you need, how much it’ll cost you, and how long it should take! Isn’t that handy? Good luck and get to work!
Or is it not such a good investment? Sorry. We know that’s frustrating, but at least you have concrete reasons why it’s not a good idea and avoided spending money on something that would ultimately be a time-sink and financial loss.
Whitestone Acquisitions specializes in buying fixer-uppers AS-IS! If you have a property in your portfolio that’s losing money or you want to sell your home without dealing with repairs and updates, we can help. Our process is quick and easy! Most sales are completed in as little as three weeks. Sound like something you’re interested in? Give us a call or shoot Allison an email to get the process started!