Fixer Upper Homes - What To Fix

You've bought a fixer-upper home you can make some money on. Now what improvements and repairs should you be making? To begin with, you need to think about this before you buy, in order to make money in fixer upper homes. You should know what you will spend, so you can know if the deal is a good one. Always have a plan. Before and after you buy, though, you need to have some simple rules with which to start analyzing possible fixes.

Think Return On Investment

Many years ago I was a real estate agent. I was sitting with a young couple that was thinking about selling their home. They were very disappointed when I told them there house was worth $110,000. "We just spent $40,000 remodeling the kitchen!" they said. The kitchen was nice. They may have added $10,000 in value to the house with their $40,000 - A classic example of a bad return on investment.

With fixer-upper homes, do things which give the most "bang for the buck." Try for a three-to-one return on improvements. To consider resurfacing the driveway for $1000, it should raise the value of the home by $3,000. Even if just guessing, keep this three-to-one formula in your head, to invest more safely.

How To Fix A Fixer-Upper

With new curtains or paint, it's tough to estimate the increase in value. Instead, group together many small repairs and improvements you are considering, and imagine how the house will look when you are done. Then estimate whether you will have increased the value enough to justify the cost.

Often small details get you the best return on investment, so look at these first. A new mailbox, hanging flowers on the porch, a raked yard and trimmed trees - $40 total if you do the work yourself - could make a big difference in the first impression potential buyers have. First impressions are always important.

Small investments that pay big include new switch covers (less than $1 each), shelves, birdhouses, new doorknobs, new light fixtures, curtains, new rocks or wood chips on outdoor paths, new faucets, new woodstain on decks, and general cleaning. Try standing in front of the house and imagining what it might look like with various small improvements (flowers, wood-rail fence, birdbath, etc.).

Big Fixes

Of course, there are things that just have to be repaired. Basic systems must function. Repairs are a given when flipping fixer-upper homes. Improvements, however, should be subject to the three-to-one rule. You can get creative here. An investor friend once had a wall put up, and for less than $1000 created a new bedroom, probably raising the value of the house by $8,000. That's a good return on investment.

Bathrooms and kitchens are important to most buyers. $1000 spent updating a bathroom can add $4000 in value to a home. $2000 spent wisely in the kitchen (new fridge, re-finish cupboards, add a garbage disposal, etc.), can add $8000 to the sales price of the house. Look for those changes which are most universally valued (don't paint the kitchen pink just because you like that color), and be sure you get a decent return on investment.

Other improvements to consider for fixer-upper homes include adding a carport, new doors, fences, gazebos, sheds, painting, carpet, benches, new closets, new toilets, a new stove, a shower/tub surround, and trees or bushes. The bottom line is the bottom line: be sure what you do returns more than you spend, preferably three times as much.