The single best way to stretch your budget and find the home of your dreams, is to find the right home in the right neighborhood that needs some work.
Fixer uppers allow you to access a more desirable neighborhood than you may otherwise be able to afford. In other words, you are buying one of the worst homes in the best neighborhood possible.
The key for you, the buyer, is to determine the appropriate level of fixer. In general, the more of a fixer, the more potential upside you will get. Homes with water or structural damage can be the most risky. So this has to be balanced with your budget for repairs/upgrades, your knowledge of how to handle issues efficiently, and your appetite for sweat equity. Do you want to manage remodeling the whole home? It has the potential to be very lucrative, but can also be exhausting, even if you are’t the one doing the work.
It’s important to also be aware of the different levels of fixing. Remodeling a kitchen costs the same no matter how old it is – you still need new cabinets, countertops, flooring and appliances. So, when evaluating, no matter how good or bad the kitchen, the cost to remodel it is the same. But – you will probably pay more for a house with a “kind of old kitchen” compared to an “extremely old kitchen.” Bottom line: A really bad kitchen can be a good thing.
Certain things are very inexpensive and produce a high return; paint, a new front door, and landscaping produce the easiest and best return on investment. Other items like system repairs (heating and cooling, electrical, roof and plumbing) produce almost no investment return. Bathrooms, also, generally produce a small return.
One last caution, people tend to overspend to get what they want, and that is totally fine. Just realize it goes past the initial investment goal and into personal valuation. For example, a neighborhood may support a $20,000 kitchen, but you may really want the $35,000 kitchen. It’s fine to upgrade, but when you re-sell, you may lose some of that value. Just make sure you enjoy it along the way.
If you have any questions about fixer uppers in the San Diego area, let me know!
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