Fixer-Uppers: What To Fix
Are you thinking about buying a house to fix up and sell? Be careful to fix the right things.
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You've bought a house, a fixer-upper you can make some money on. What improvements and repairs should
you make? First of all, you need to know this before you buy, as I explained in another article. Before and
after you buy, though, you need to have some simple rules with which to start analyzing possible fixes.
Return On Investment
A young couple was very disappointed when I told them there house was worth $110,000. "We just put
$40,000 into remodeling the kitchen!" they told me. I looked at the kitchen. It was nice. They had added
$10,000 in value to the house by spending $40,000. This is a classic example of a bad return on investment.
With fixer-uppers, you have do things which give the most "bang for the buck." Aim for a three-to-one
return on improvements. If you're going to resurface the driveway for $1000, it better raise the value of the
home by $3,000. Even when you're just guessing, keep this three-to-one formula in your head, if you want to
How To Fix A Fixer-Upper
With things like new curtains, you can't really estimate the increase in value. What you can do, though, is
group together the many small repairs and improvements you are considering, and imagine how the house
will look when you are done. Then you can estimate whether you will have increased the value enough to
justify the cost.
It often is in the small details that you'll get the best return on investment, so look at these first. A new
mailbox, flowers on the porch, a raked yard and trimmed trees - $30 total if you do the work yourself - can
make a big difference in the first impression potential buyers have. First impressions are important.
Other small investments that pay big include shiny new switch covers (less than $1 each), shelves, a
birdhouse, new doorknobs, new light fixtures, curtains, new rocks or wood chips on outdoor paths, new
faucets, new woodstain on decks, and general cleaning. Stand in front of the house and imagine what it
might look like with various small improvements (flowers, wood-rail fence, birdbath, etc.).
The Big Fixes
Obviously, there are things that just have to be repaired. The basic systems must function. Improvements,
though, should be subject to the three-to-one rule. You may have to get creative here. An investor friend of
mine once had a wall put up, and for less than $1000 created a new bedroom, probably raising the value of
the house by $8,000. Now that's a good return on investment.
Bathrooms and kitchens are important. A $1000 updating of a bathroom can add $4000 in value to a home.
Spend $2000 wisely in the kitchen (New fridge, re-finish the cupboards, add a garbage disposal, etc.), and
you can add $8000 to the sales price of the house. Look for changes which are most universally valued
(don't paint the kitchen pink because YOU like that color), and be sure you get a decent return on
Depending on the fixer-upper, there are many potential improvements that can be worth doing. These
include adding a carport, new doors, fences, gazebos, sheds, painting, carpet, benches, a new closet, a new
toilet, a new stove, a shower/tub surround, and trees or bushes. The bottom line is the bottom line: be sure
anything you do returns more than you spend, preferably three times as much.
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