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Buying a fixer-upper can be a great real estate investment but the secret is finding the right house. There are obvious benefits to buying a fixer-upper including lower sales price, less competition, resale potential and the satisfaction of a job well done.

The infographic below from California Association of REALTORS® outlines the signs that mean it’s time to pass on a fixer-upper.

Infographic outlining the elements of a home that indicate it is a bad buy including stuck doors and windows, sloping floors, smell of moisture and zoning rules.

We all know that the ideal fixer-upper is one that everybody wants – just not yet. The key is seeing past the peeling paint, worn carpets and popcorn stucco walls that other buyers can’t. To help you narrow in on exactly what else makes a fixer-upper a worthy real estate cause, here are the most important points to consider.

Cosmetic Repairs Vs. Structural Repairs

The most important determining factor in whether or not a fixer-upper is worth the work is the type of repairs it needs. Generally speaking, cosmetic repairs cost much less and are easier to complete than structural, electrical or plumbing repairs.

Cosmetic repairs simply take time and commitment. If you have the patience and determination to make your fixer-upper look better, you stand to gain from the purchase. Here’s a quick list of pricey repairs to avoid (or keep to a minimum):

  • Replacing HVAC systems
  • Foundation work
  • Reroofing
  • Large scale plumbing, sewer, and electrical replacements
  • Pouring concrete
  • Complete remodel in the kitchen & bathroom
  • Room additions

How Much Do The Repairs Cost?

If a repair costs more than it adds to the resale price than it might not be worth it. When you’re viewing homes, make a list of repairs and consider the price of those repairs closely.

Traditionally it’s cosmetic improvements like paint touchups, floor refinishing, windows, siding and new lighting that are the most lucrative improvements. Here’s how to do the math to figure out how much a fixer-upper is worth:

Estimated cost of repairs (materials + labor) + 5% for unforeseen problems

Subtract this from the estimated home’s market value after your renovations. What’s left should be your offer (how much you should be willing to pay for the home).

Location, Location, Location!

Location matters when considering a fixer-upper. A house on a busy street, across from a sewage plant isn’t desirable and still won’t be desirable even with a new coat of paint and wood floors.

The key is finding a neglected home in a desirable neighborhood that you can bring back up to the area standard. Remember, great schools are also important to most homebuyers so a house by a top-rated school will be a good resale.

Do You Have The Time?

Repairs and renovations take time so be sure you’re realistic about taking on the project. If you have the time to put into a fixer-upper and can handle the added stress, then this could be a great real estate investment for you.

Get An Expert Opinion

Working with a buyer’s agent is free and a huge help – especially when you’re deciding on a fixer-upper. A local real estate expert will be the first to know when a good deal comes onto the market and is an excellent judge of worth. An agent who is familiar with the area you’re interested in will be the best judge of price, worth and future resale.

If you’re interested in investing in a fixer-upper and want a second opinion, ask a First Team agent. With over 2,400 area specialists across Southern California, it’s easy to find the right agent for you.