11 October 2012

Why a Fixer-Upper in the City? 10 Reasons

After one has taken a home through all inspections, and the assessment is primarily cosmetic repair with no major plumbing or electrical updating issues why move forward with a fixer-upper purchase?  I'll give you ten reasons.

1.  Save Money
One can save money. If one learns the market and studies the neighborhood, one can make a competitive bid.  Houses in the city can cost more than the suburbs, but not necessarily if it is a fixer-upper with a smaller footprint.  What are similar houses in better condition going for?  IF it is a foreclosure, it is the lowest price already.  If it is a short sale generally the price is the price too.  But in either of those situations the house is usually less than everything around it.  Maybe no mortgage...
For us, we prefer to spend less on gas and a home.

2.  Personalization and Preservation
One can personalize the home and make improvement in one’s style.
But for some, an historic neighborhood is desirable because one likes old buildings and preservation.

3.  Save Time on Driving and Gas
Driving from the suburbs to the city takes time. Driving an hour to appointments and classes and then back is tiring, not to mention the gas prices being high and volatile.

4.  An Eye for Design
Do you love looking through magazines, B.H.G. and Pinterest? Do people compliment you on your eye or decorating skill? If one has an eye for design, there is no added expense of adding an interior designer or landscaper.

5.  A DIYer
Are you handy with a saw and good at measuring? This ability saves money for example, our bathroom remodel cost about 1500 dollars, but if I had to pay someone to do the work it would have been more than 10,000 dollars.

If one enjoys projects and is persistent to see them through fruition then a fixer-upper could be the way to go.  I know other people who have done this, but they waited until they moved to fix it up.  Not me! I can’t live that way; one should enjoy home, besides someone might not like the improvements and then one has wasted money.  Enjoy your home now; it is so rewarding when projects get checked off.

6.  "Location, Location, Location"
One can be in a better or more convenient location.  We like that we are closer to the arts, shopping, and museums.  There are restaurants within walking distance and mom and pop’s shops. Though we miss the outdoors, we managed to find a home near hiking and the preserves.  So there was a trade off, but we compensated.

7.  Downsize
If one wants to downsize for age or for financial reasons such as college, then a fixer-upper can be a good choice.  An older home usually has no HOA fees or special assessments; this saves a lot of money. Is your HOA doing your front yard? How much do you use the pool or exercise room?  Look at how much of the money they collect that goes to the operating cost of the HOA; it's more than 50 percent when finished out.  (Older HOAs have special assessments.) ( Also, beware when you buy new; the builder is subsidizing the HOA, and when it is finished the monthly fee skyrockets.) And as far as the neighborhood looking the same... all they do is fine, and if you have a really rebellious neighbor, they never comply.  (We had one of those for two years, until he moved away.)

8.  Renaissance
The neighborhood one is looking at is undergoing a renaissance and is close to the center of town.
How about the walk quotient? Can you walk or ride a bike to restaurants, grocery store, library, or religious community?

9.  NO HOA 
One loathes HOAs or believes their home is their castle, or one doesn't mind that all the houses don't look the same.  (This also means tolerance for unique neighbors, though some cities have front yard ordinances that can be enforced by the city.)

10.  More Time 
Do you prefer to spend time in your home or your car?
Do you want more time for hobbies, working with your hands, or the arts?
Then a fixer-upper is a good idea.

One is adventurous and persistent.  There are going to be set backs.  My rule is a one day project equals three days of work.

Where to you get the money to fix it up?
Maybe you paid up front; that's the way to go.  (Think about it; 20 percent on a 300,000 dollar home is 60,000; you can outright buy something in some places for that, but make sure you either know or studied your target area and have paid your own inspectors.)

Or one bought less to begin with, so the taxes will be less.  (IMO banks over estimate what people can afford.  What happens when one looses his or her job or one suffers an income reduction in a business?  (Six-months of savings does not go far and one wrapped up their funds in a 20 percent down payment.  Do you think the bank will care how much you put down and put in if one can't make the payment?)

There will likely be no HOA.  There will likely be no special assessments on the tax bill for your public schools.  There will likely be no special assessments on your electricity, water, gas, and sewer bill for being new. How about an assessment for larger pipes?  True.
 (Having none of those things to pay can save you 300 to over 1000 depending on the community.)

Also, you are no longer paying several hundred dollars a month to refuel and maintain your car.
If it a smaller home you will save money on utilities.  Our electricity bills is 40 percent of what it use to be, even with two remaining windows that await restoration.

Finally, there will be no house payment or a much smaller house payment, because one didn't go beyond your financial, comfort zone.

Don't be the Jones, be yourself.

What about schools?
Know your districts ahead of time,
but that doesn't necessarily matter in places that have open-enrollment.
Depending on the area there can be great, FREE charters,
or private schools with scholarships available.
Homeschooling in the city is easier.

How much can you fix it up?

Don't put in beyond what a house sells for in your area.
Don't use credit and don't borrow to fix.
So if you find one for 60,000 and homes are going for 100,000, gradually fix it up.  If one does the work his or herself and uses affordable materials, one will spend less than 40,000 to fix it.

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