“Drive until you can afford the payment” must be the most frustrating catchphrase in real estate. In a few short words the statement epitomizes the frustration of millions of potential homeowners and that frustration is growing every day as the best places to live get more and more expensive.
Today’s buyer wants to be close to the action, in a neighborhood that offers great places to eat, things to do, farmers markets on the weekends and live music around the corner at night. All features that can be hard to find in that distant suburb with nothing but bedrooms and big-box stores. They’re also features that come at a price. The best neighborhoods cost considerably more to buy in.
Find the most visually run-down but mechanically sound house you can get your hands on. Look for a good roof, updated electrical and air-conditioning and a solid structure.
One way to beat that cost is to buy a fixer-upper. Find that handyman special tucked neatly into the perfect neighborhood and buy it for a song. Spend nights and weekends painting while you eat takeout noodles and listen to Gary Clark Junior. It’s the American Dream … if only it were that simple.
As it turns out, reality is often more complicated, and finding the balance between location, home condition, your fixer-upper skillset and your overall budget can be quite the intricate equation.
Without promising to solve the unsolvable, let’s look at some key considerations to make when trying to balance a fixer-upper’s condition vs. location.
Consideration 1: Mortgage Financing and Homeowners Insurance
If you’re looking to borrow the purchase money for your home in the form of a traditional mortgage, you’re going to need insurance and that means your home has to pass inspections and meet some minimum standards. This means you don’t want to waste your time looking at those fixer-uppers that need major repair work done.
Consideration 2: DIY Skills and Time Available
Are you capable of doing the bigger work, such as repiping the plumbing or rewiring the electrical? Can you get up on the roof and put on a whole house full of new shingles or are you going to hire out that kind of work? Also think about how much time you have to devote to home improvements.
Consideration 3: Renovation Costs
A common mistake is to underestimate how much it will cost to do the work on a fixer-upper. The excitement builds and caution falls by the wayside. I’m all for rolling the dice in life when a big opportunity comes your way, but don’t bite off more than you can chew!
Consideration 4: Your Definition of ‘Right Neighborhood’
Here’s where it pays to spend some time really looking around and some time really looking within. Knowing what matters most to you is the key. Do you really need to be able to walk to a handful of great cafes and shops, or is it more important to have a fenced yard so you can let the dog out in the winter without getting bundled up?
An advantage of the trend toward more livable urban areas is that we’re seeing small micro-downtowns popping up all around major cities. These areas are often just a street or two but they include a few shops, a few places to eat and drink and maybe a small park. It may not be the urban lifestyle you dreamed about, but it could be close enough to make life happy.
Consideration 5: Commute Time and Cost
That whole “drive until you qualify” concept I first mentioned isn’t the same equation it used to be either. Drive times are longer and gas prices are higher. A close family member of mine drives 90 minutes each way every day! That’s 15 hours per week, plus gas and vehicle expenses. Hundreds of thousands of people do the same thing every day. If it costs five hundred dollars more per month to live much closer, it might still be the more economical choice.
Condition vs. Location: The Winning Formula for First-Time Home Buyers
It’s kind of a complex equation, isn’t it? If I were to boil it all down and try to hit the bullseye for most people, and by that I mean I’m excluding cash buyers and licensed contractors who can fix any level of mayhem, this is what I’d come up with.
- Realize there’s a practical limit to how far you can drive every day. Create a reasonable radius around your workplace.
- Get out there and look around at ALL the neighborhoods, not just the ones you know are hip and cool. Redevelopment is happening everywhere and places that used to be lame are getting better every day.
- Find the most visually run-down but mechanically sound house you can get your hands on. Look for a good roof, updated electrical and air-conditioning and a solid structure.
- Don’t worry about the look. That’s your fixer-upper magic waiting to happen.
- Buy it, make a plan and buy some paint (and take-out).
- Cue the music and enjoy living the dream!