Ask the Expert
Buying a fixer upper
Q: Before we make a real estate purchase labeled 'fixer upper,' what should we know (to avoid any regrets later)? We like the idea of buying a home 'on the cheap' and doing some cosmetic fixes, but what are some tips to help us be assured the purchase won’t turn into a money pit?
In Alaska, we have a different type of market than you see on shows or in classes you can attend. You must look at several factors before you even buy, such as buying a property that the general market can support. Being out of the median price range for the area or an outlying style of property for the neighborhood can make for a difficult resale when the property is ready for the market, whether you are a flipper or an owner occupant.
First, decide whether you are going to be an investor and buy to flip, or an owner that will occupy while you fix it up. Each scenario will bring a whole different set of guidelines and planning.
Your best bet is to do your research before you put any money into your project. Talk with your accountant about tax issues related to buying and selling as an owner occupant or an investor. Secondly, talk with a real estate professional, they will help you wade through the market to find the best value for your plans. And lastly, don’t forget to do a walk-through with your contractor to assess the property and make sure you know what you’re purchasing.
The basics include a budget that encompasses all dollars involved; not including a portion of it for unforeseen issues would be your biggest pitfall. It is a rule of thumb to give yourself a 20-30 percent allowance of your entire budget for these items. There are many resources online to help guide you in creating a budget.
Contractors are a huge component in this scenario. Choose wisely! Do your research through referrals and filed complaints with your city. The pitfall is that cheapest is not always best. They could possibly cause more damage than fixing, and the best route is to make sure they are licensed and bonded.
The takeaway here is research, ask questions and know your resources to give you guidance. Your tax accountant, city website, interior designer, real estate professional and contractor will be your toolbox to make the best experience possible. Every project will throw you a curve ball, but you don’t have to fall into every “pitfall” if you plan ahead of time.
