Real Estate Ray's Blog

One of the nice aspects about buying a fixer upper in Sioux Falls is that the purchase is not contingent on the temperature of the real estate market -- whether hot, cold or neutral -- any time is a good time to buy a fixer. But avoiding costly mistakes involves one crucial trick: “You may learn from your own mistakes, but it’s better to learn from the mistakes of others.”

Here are 10 of those:                                                                         1) Buying Too High or the Wrong Location                                                 You can avoid both these problems by working with an agent like Real Estate Ray to look at comparable sales and drawbacks for the neighborhood. Remember, the best time to think about selling is when you buy.

2) Not Researching Code and Obtaining a Permit                                    Some permits may appear unnecessary, but get a permit anyway, because it's against the law to refuse to comply. More reasons are: to get the job done correctly, for buyer assurance, and to avoid having to start over when discovered by an inspector or neighbor.

3) Failure to Prepare a Written Work Plan                                             Prepare a calendar, day-by-day, outlining each portion of your rehab and how many hours it will take to complete. This will keep you on a tight schedule and give you a realistic time frame from start to finish.

4) Under Budgeting                                                                                    Itemize every scrap of material in your estimates, including mundane items - they all add up. Then account for at least a 15% overage of materials for waste. Throw in another 30% for price increases if you're not buying all your materials at once.

5) Tackling Jobs for Which You are Unqualified                                         Life is short ...know your limitations!  Think about the job from its inception all the way through to its completion. You don't want to reach the halfway mark and discover you can't finish. Don’t hesitate to hire somebody more qualified than you to do part fo the job.

6) Not Planning for the Unexpected                                                            You have no idea when you tear open a wall what you will find: pest infestation, structural repair, wiring that needs to be replaced, pipes that need to be rerouted or moisture problems. Pad your budget and allow yourself a bit of flexibility in your work schedule to accommodate these not-so-nice surprises.

7) Waiving a Home Inspection                                                                       Be an informed buyer. Hire a qualified, accredited inspector. Be there for the inspection and ask questions. Pay close attention to safety issues. If the inspector calls for further inspection by another professional contractor, find out if the inspector is telling you there could be a serious issue or if the inspector isn't licensed to address that issue. There is a difference.

8) Using the Wrong Tools                                                                            When it comes to tools, you can't go wrong by buying professional tools that are made to perform specific functions. Using the proper equipment ensures safety.

9) Buying Cheap Materials                                                                          Don't skimp. Buyers will notice. You want the quality of your work to shine throughout the house. If you shop carefully, you can purchase brand-name merchandise for less. Then you can advertise those manufacturer names and buyers will never know how much you paid.

10) Under Estimating the Resale Value                                                    Work with a Realtor, like Real Estate Ray, to check the comparable sales for similar homes in the neighborhood to determine if your improvements are in line with other homes in that area. You don't want to over-improve. Plan for the bottom of those comparable sales as a return on your investment and anything you make above that figure is gravy.

The perfect fixer upper is the home that everybody wants when fixed up but few can see past its imperfections to buy. The peeling paint, sagging ceiling or worn carpet are correctable features that turn off many home buyers. They can't see past the disarray. If you are one who can, however, you'll have the financial payoff as well as the satisfaction of a redeemed property.

What to Look For in a Fixer Upper Home

· Location - You've heard it a million times but it's true -- location drives saleability. Don't buy a fixer upper that is located on a busy street, next to a school or across the street from a power plant. Look at fixers in desirable neighborhoods. That doesn't mean you can't make money, but given the choice, wouldn't you prefer a sought-after neighborhood? Examine the surrounding homes and pay attention to how the homes are maintained. Are the lawns manicured? Do you notice deferred maintenance on the neighboring exteriors? Does the neighborhood appear conforming with mostly owner-occupied housing?

· Configuration - The best type of fixer upper to buy is one that will appeal to the largest pool of buyers, which is a 3 bedroom with more than one bath. That's not to say a two bedroom isn't profitable, especially in a neighborhood of primarily two bedrooms, but three are better. If three bedrooms are better, four are better yet as some buyers who need a four bedroom will not consider a three bedroom, but a three-bedroom buyer will purchase a four bedroom.

· Layout - If the home is chopped up with a bad layout, realize that it can be expensive or impractical to move walls. The layout should flow. Bedrooms at opposite ends of the home will turnoff buyers with young children, as will a two-story with the master upstairs and the other bedrooms downstairs. Kitchens with more than one entrance are desirable.

· Condition - What's a major rehab to one home buyer is a walk in the park for another. Consider your expertise and whether you want to tackle a home that requires a major renovation to make it habitable. Minor cosmetic improvements are typically less costly and easier on your budget.

Fixer-Upper Repair Estimates

Easy fixes are:

1. Patching walls, stripping wallpaper and painting.

2. Refinishing floors, laying tile or carpet.

3. Installing ceiling fans and new light fixtures.

4. Replacing baseboards or adding trim.

5. Fixing broken windows.

6. Replacing bathroom subfloors due to leaky toilet seals.

7. Installing new or refacing/painting kitchen cabinets.

8. Replacing doors.

9. Changing out receptacles/light switches.

10. Painting the exterior.

11. Adding a deck.

More expensive fixes are:

1. Replacing HVAC systems or adding central air.

2. Shoring up foundations.

3. Reroofing, when it involves a tear-off.

4. Updating plumbing, sewer lines and electrical.

5. Pouring concrete for driveways, sidewalks, steps.

6. Replacing windows.

7. Complete kitchen/bath remodels.

8. Building garages/additions.

When considering the purchase of a fixer-upper -- if your contract lets you cancel the purchase contract for any viable reason -- always, always, get a home inspection by a credentialed home inspector before committing to complete the sale.

The Farmers' Almanac says we are heading into a long, hard winter this year.  Whether you follow that or not is a matter of opinion.  Will heating costs be higher this year or stay steady?  I can't predict that either.  Regardless, if you live in South Dakota (or any northern climate), you'll have no choice but to heat your home and pay the bill.  Studies find that you may spend 25-50% of your monthly budget on this one expense.  So, despite the per-unit cost of this expense, we could all benefit from saving money this winter.  And the last thing we need after that, or heaven forbid, in the middle of it, are extra headaches and expenses from damage or emergencies that could have been prevented with some thoughtful planning.  So, here are some tips for how you can keep more of your money, if you start now.

Heating 

Change furnace filter and have it inspected – poorly tuned units will use more energy.

Switch to programmable thermostat for more accurate and regulated temperature.

Don’t heat rooms not used - for example, guest rooms – close door and vents.

Only run the bathroom or kitchen vent as long as needed. Vents can suck all the heat out of a house in an hour.

Turn down/program thermostat low at nights (60-65 degrees).

Don’t alter the thermostat frequently throughout the day.

Dress for the season - Put on a sweatshirt, long pants and warm socks/slippers.

Insulation/Seal

Cap or screen chimney to keep out rodents or birds

Have chimney inspected, and cleaned if necessary to remove soot and creosote build-up(creosote is a wood preservative that, when emitted from burned wood, can build up in the chimney and cause a fire)

Check damper for seal and keep closed when not in use to keep animals out and prevent heat from excaping from your home.

Water issues

Inspect exterior and seal cracks or exposed entry points.

Cover basement window wells with plastic shields.

Extend downspouts to direct water away from house.

Check flashing to ensure water cannot enter your home.

Locate your water main in the event you need to shut it off in an emergency.

If you go on vacation, leave the heat set to at least 55 degrees to prevent pipes from freezing.

Exterior

Inspect wood trim for rot or pest infestation and replace if necessary.

Prime & paint exposed/new wood to prevent weather damage.

Replace loose or damaged siding.

Add insulation to attic to prevent warm air from creeping to roof and causing ice dams.

Replace worn shingles.

Clean out gutters and consider installing leaf guards.

Equipment

Drain gas from lawnmower.

Clean and store summer equipment.

Service snow blower &/or replace worn snow shovels.

Drain all garden hoses.

Safety

Check your local requirements – some cities require a smoke detector in evey room.

Inspect/Install smoke & carbon monoxide detectors.

Purchase extra batteries.

Replace a fire extinguisher older than 10 years.

Prepare an emergency kit including: candles, matches/lighter for use during a power outage, the phone numbers of local utility companies, bottled water and non-perishable food items (including pet food), flashlights and batteries, first-aid kit and evacuation plan.

Rehearse the evacuation plan with your family from different locations in your home.