Have you found a home that could potentially be your dream home, but it needs a ton of work to get there? While it may be ideal to purchase a home that is ready to move into, going with one that needs renovations could open your options to more square footage or a better location. Before you make an offer on the house, there are things you should know about buying a house that needs a lot of TLC to get it the way that you want.
Use a Structural Engineer
As part of the home-buying process, it's common to have the home inspected to find out what is potentially wrong with it. You may want to consider going beyond a basic home inspection and actually having an engineer take a look at it for potential problems. One of the most expensive kinds of repairs to a home will be if there are problem with the structure, and paying an engineer around $512 could be well worth the cost if you discover that the home will be a money pit for major repairs.
Find Financing For Renovations
Securing a loan is essential for most home purchases, but when major renovations are involved, you may need money to help pay for repairs. FHA 203k loans are designed specifically for buyers that are purchasing a house with the intentions of doing renovations. It combines renovation costs and home purchasing costs into a single loan, which will save on loan closing costs since you won't need to do it twice. When it comes to the renovation portion of the loan, your financing must fall between $5,000 and $35,000 to qualify.
Consider The Home's Final Value
If you plan on eventually selling your home, you want to consider what the value of the home will be compared to other homes in the area. You do not want to take an existing home that fits in quite well and transform it into a home that is well above the price range of what would be considered acceptable. If so, you may never see a return on those renovations when it comes time to sell. Buyers will either see the home as too expensive in general, or too expensive for the area when they can buy elsewhere in a different part of town.
Look Into Tax Abatement
When performing renovations, you may qualify for tax abatement to reduce how much property tax you owe on the property. Check with your real estate agent for more information about this, since the rules are different from one county to the next.