January 7th, 2017 11:36 AM by Jackie A. Graves, President
how that sad-looking house can be a wealth-builder.
2012, Alessandra Pollina and her husband, Ondre, were looking for a property
that would need no more than some cosmetic changes and upgrades. But because
the price was right, they ended up with the ultimate fixer-upper: a two unit,
single-family-style home that was already gutted to the studs.
They were excited about its potential, not to mention the
one-half acre of land the house is sitting on. “That’s unusual for Boston,”
Pollina says. “It’s the biggest backyard ever.”
Four years and many renovations later, Pollina estimates her
home in the Dorchester neighborhood is worth (drum roll, please) an epic56%
more than it was when
she bought it. Wow, talk about a return on investment.
The moral? A fixer-upper isn’t necessarily something to eschew.
If the right things are wrong with a house, you
could not only turn it into your dream home, but also earn serious equity
(wealth building!) in the process.
Oh, and don’t assume you need to be a DIY master to make it
worthwhile, either. Time and patience may be all you need.
how to tell if that fixer-upper is a keeper — or if you should keep
If it’s a fixer-upper, it should come at a fixer-upper price.
Duh, but that’s a reminder NOT to fall in love too quickly with a home that the
listing says “just needs a little TLC.” Do your homework first, and if the
price is right, then fall in love.
Find out what similar homes in the neighborhood sell for and how
tricked out they are (with amenities and materials). A REALTOR® can help you
figure that out. And that will tell you how much money you can invest in the
home before you over-improve for the neighborhood, a mistake you want to avoid
if you plan to sell in the future.
Wendell De Guzman, a Chicago real estate investor who renovates
at least two houses a month, recommends treating the remodel like a business,
not a hobby. Determine your budget based on the market value of homes in your
neighborhood, because you’re not going to sell for more.
“It doesn’t matter how much money you can put into the house,” Guzman says.
“You’re limited by the market value of what nearby houses are selling for.”
The best fixer-uppers offer lots of opportunities for “instant
equity,” which means if you sold the home tomorrow you’d pretty much get that
money back, unlike other projects which you may never get your money back on.
Some can be as simple as painting or
landscaping, which you can accomplish with sweat equity, De Guzman says. In
fact, the Pollinas started their rehab with high-value, low-effort landscaping,
since it’s the first thing people see. They raked, brought the grass back to
life, planted fruit trees and a veggie garden, and enjoyed the reaction:
“People are so surprised and impressed,” Alessandra says.
Other tasks — the Pollinas focused on the kitchen next — may require the work of
professionals and cash to pay them. It’s those projects you want to carefully
evaluate against the home’s price.
Fact: While most home improvements add some equity, some are
consistently at the top of the heap. Another thing those equity champions have
in common: They usually require the help of a pro, but the cost can be instantly worth it.
Based on data gleaned from the NATIONAL ASSOCIATION OF
REALTORS®’ “Remodeling Impact Report” (RIR), if these four projects are on your
fixer-upper’s list of must-haves, then you may have found your dream
1. New roof: A new
roof may not be the remodeling project of your dreams — until you realize it
could actually pay
you. You’ll spend about $7,600 to install it (based on a national
average determined by contractors responding to the RIR survey), but when you
sell, it could recoup 105% of that or $8,000, according to REALTORS® surveyed.
2. Hardwood floors: It
costs about $2,500 on average nationally to refinish hardwood floors. If you
bought a house that already had refinished hardwood floors, you could pay about
$2,500 more for the home. But if you’re looking at a fixer-upper (at the right
price) that needs the floors redone, that’s like getting the floors for free!
New hardwood floors are also a good choice at a cost of about $5,500 to
install, and could recoup $5,000 of that at resale.
3. Insulation: A
fixer-upper offers a great opportunity to replace or add insulation. New
insulation costs about $2,100 on average nationally, and can recoup $2,000 at
resale — as if saving 10% to 50% on your energy bill wasn’t compelling enough.
4. New siding: Droopy, old siding can be
great news on a fixer-upper. Vinyl siding costs about $12,000 to install on
average nationally, and recoups about $10,000 when you sell. Getting a
fixer-upper for a price that more than covers the cost of siding installation
is, well, priceless.
those four are pretty safe bets — homeowners who responded to the RIR
survey gave them high happiness and satisfaction marks,
too — almost any project can be worth it with a fixer-upper if the
price is right. For example, a complete kitchen renovation can cost
$60,000 and recover only about $40,000 when you sell. But if the fixer-upper is
discounted enough, think how amazing it would be to cook in a kitchen you
Whether you’re a DIY Jedi or content to let the pros handle the
remodel, if your patience is shorter than your potential home’s to-do list, a
fixer-upper may not be a good choice.
Renovating a bathroom alone can take two to three weeks. Add
hardwood flooring, a new kitchen, and siding, and you’re looking at a whole
summer’s worth of rehab.
When considering a fixer-upper, evaluate the limits of your
emotional energy as well. Inevitable project pitfalls and delays can be
wearing. Only if you have the time, patience, and emotional endurance for a
fixer-upper will it be a good fit for you. And only you can determine that.
But if you can budget your time and money — and employ the right
fixer-upper strategies — you might find yourself with a double reward: A home
that’s worth far more than you paid, and the joy of knowing you helped get it
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