My clients bought a home in Wellesley that was once grand, but by the time they bought it, not so grand. It was an Estate sale that had every member of the extended family crammed into any free space and it was clear that it had been a long time since any money had been put into the house. But, for them, it was a great move. The house is large enough that it can be a lifetime home, not a starter home. My clients definitely have a knack for orchestrating a home renovation and they had the patience to live through it. Check out these kitchen photos for an example of the work in progress. The full blog can be found at http://happyhamillhome.blogspot.com/. Feel free to follow the blog and ask how they made such a dramatic change on a realistic budget.
So what does it take to turn a “diamond-in-the-rough” into a diamond?
- The Vision
- The Money
- The Ability to Manage the Project
- The Patience to Live Through a Renovation
Can you see past the clutter, ugly wall paper, dated cabinets, etc to envision the house at its full potential? Can you be realistic about the best improvements to make so that the house is done over tastefully, yet not over improved? Not everyone can – so be honest with yourself. Beyond that, ask yourself:
- Is the house worth the renovation? You have to be able to look at everything that needs to be done, add up what that would cost, add that to the price you pay for the house and then determine if the house could sell for at least that much when you go to sell. Factors to consider are location, size of the house, layout of the house, and size of the lot.
- Can the location support the price I would have to sell the house for in order to not take a loss?
- If the house is small and the lot is small, the next buyer may not want the improved house because they will be paying top dollar for a house that cannot be further improved in size or condition.
- If you want to make additions, you will need to make sure zoning laws allow for that.
- If the house is chopped up, rooms are too small, plumbing is too far away to add bathrooms, etc. then to turn the house into what you want it to be may be cost prohibitive.
This is where your Realtor can help you. Not only by recommending good contractors and tradesmen, but also by working with you to look at values of homes in the neighborhood that are already in good condition to see what the value of your improved home could potentially be and to help you make an offer accordingly. Your Realtor should also be familiar with local zoning laws to tell you whether or not what you want to do can be done.
This is the main factor that could make it impossible to buy a home in need of renovation. Most buyers will have the income level to qualify for a mortgage and may have the down payment saved up, but few would have tens or hundreds of thousands of dollars left over to renovate a home. If you do not have the extra money, there are few options in today’s mortgage market. You have probably heard of FHA Rehab (203K) loans. While this is a good way to get a loan that can cover the cost of buying and fixing up a home, they are complicated loans with some disadvantages. Contact me if you want to better understand Rehab loans.
Another option is to borrow from family, fix up the house, then refinance at the higher value to pull out equity to pay them back. Of course, you would have to be able to afford the higher mortgage and the house would have to appraise for enough to pull the money out.
And, of course, it is important to keep in mind that renovation budgets almost always go over what you planned.
The Ability to Manage the Project
- Can you be around to manage the contractors?
- Are you skilled at Project Management?
- Are you capable of being firm with contractors who may not keep to schedule or budget?
The Patience to Live Through the Renovation
Your home will be in a state of chaos, there will be dust everywhere, it will feel like the contractors are living with you, and you will be working with a makeshift kitchen or bathroom if you are remodeling those rooms. Often people move out of the home during the renovation, but then you have to be able to afford the temporary housing in addition to the renovation.
These clients did it right. They had the vision to see what the house could be, they chose a house that already had good bones, the products and finishes they chose kept them to budget but also fit the character of the house, and they were great at managing the project. I am impressed with the results so far!
Want to talk about selling your home? Feel free to contact me.