How To Know if You Are Getting A Deal in Pittsburgh when Buying a Fixer-Upper
Buying a fixer-upper property, or one that needs a lot of work, is a great alternative to buying a home that is move-in ready. If you “buy it right,” you can save a significant amount of money, which can be great for your equity and long-term wealth-building. You can also customize the home to your taste, turning it into the exact home you’ve dreamt about - all while saving money!
Before you purchase any property, however, there are several things you need to consider. Here are a few things to consider when evaluating whether to buy a fixer-upper house in Pittsburgh!
Analyze the Neighborhood (and Surrounding Area)
You’ve heard it before - “location, location, location,” the three most important words in real estate. When evaluating whether to buy a property, you have to look at the market. Is the property you are considering buying at risk of depreciating? Are the other homes in the area going up, or going down, in price? You can do this by looking at what comparable homes are selling for, compared to what you are paying for the fixer-upper home, plus the repair costs. When evaluating rehab costs, make sure to include a rather significant margin of error (somewhere around twenty percent (20%) is probably a good idea. When renovating a fixer-upper, especially if it is your first project, there are always unforeseen costs, make sure you are prepared!
Be Realistic about the After-Repair Value (also called the “ARV”)
As a general rule, most people who fix up a property do not get back every dollar they put into it. If you spend $50,000 on upgrades, you will not automatically add $50,000 to the value of your home. If you are fixing up a home for the purpose of flipping it, be careful! When doing so, make sure you are doing repairs that will be appealing to a wide range of potential buyers. DO NOT overspend on upgrades and finishes that YOU like - you are probably wasting money if you do. Again, focus instead on what makes the home livable and appealing to a wide range of people - think neutral color palettes and clean, simple design.
Be Honest About How Much Work You Can Do Yourself
Even if you can envision exactly what a fixer-upper home should look like (which is a skill in and of itself), are you actually capable of making it look that way? Do you have the necessary skills and experience to fix the place up? Do you have the time, or is the project going to drag on for years because you are busy working at your day job during the week? Of course, undertaking weekend DIY projects and small repairs are great ways to save some money and increase the value of your home over time, but getting into complicated, expensive, and time-consuming renovation projections can go wrong in any number of ways. In the case of a flip, you may end up wasting valuable time, delaying the project, and holding onto the property for much longer than you intended to - this increases costs. You also may also end up having to “pay twice” for one project if you end up needing to hire a professional anyway. The bottom line is you need to be honest with yourself about what you can (and should) do, and what should be left to the professionals. Going either route is fine, but make sure you run the numbers properly!
A (very) Quick Checklist of the Fundamentals:
These are countless decisions that go into buying and fixing up a property. With that being said, in terms of costs, most of your money will end up being spent in just a few areas. None of these things are dealbreakers, again, you just need to make sure to properly include the costs of addressing these issues into your budget. These are some of the most important things to consider. If you are inexperienced, make sure you have the property professional inspected, and speak to an experienced contractor (or service provider, e.g., HVAC technician, about the costs of repairs.
Always make sure to check:
The foundation: Is the foundation intact, are there cracks, is it sloped? If so, these are some of the most expensive and complicated issues to address. With that being said, foundation issues result in lots of people walking away from a deal. if you can learn to be an expert in evaluating and analyzing foundation repairs, that has the potential to make you LOTS of money1
The structure, a.k.a., “the bones”: What is holding up the house up? How is it constructed, and does it feel solid? Again, structural issues with a property can be expensive and complicated to address - but they could also be an opportunity to purchase a fixer-upper property for MUCH less.
The roof: What type of shape is the roof in, and are there leaks? Is there water damage inside the property? How long has it been since the roof was repaired or replaced?
Heating/cooling: What type of shape are the heating and cooling systems in, do when was the last time they were updated? Heating and cooling issues, or problems with the "HVAC” system, can be costly to fix, but they are still very manageable. Just make sure to run the numbers and include the costs in your budget.
Plumbing: Are there issues with the plumbing? Do you see water damage or leaks? Is there even plumbing in the property? In some situations, particularly in older homes, copper piping may have actually been pulled out of the walls because of its value. It can all be added back, just make sure to budget accordingly.
Electrical: Are there any electrical issues in the property, and has it been updated from the old “knob and tube” wiring. The electrical system in a property should be evaluated immediately because issues can present a fire risk. Just like everything else, electrical issues can be addressed.
In summary, make sure to take your time, conduct a detailed inspection, and talk to professionals to get estimates when you are buying a fixer-upper property, in Pittsburgh, Pennsylvania. You can turn that fixer-upper property into your dream home, or into a flip - just make sure to do your due diligence!