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Everybody loves home makeovers – from punching up a boring wall with bold paint to turning an old, trashy piece of furniture into a museum-worthy statement piece. We take pride in revamping something that seems so hopeless and transforming it into something valuable, and in some cases, profitable. That’s why some frugal yet resourceful folks choose to remodel fixer upper properties than to settle for new yet pricey buildings.

A fixer upper is a property that has to go through series of repairs and renovations before you can call it a “home.” The repairs can range from minor cosmetic work like repainting to the advanced procedures like plumbing, electrical works, and creating a new foundation. The price tag is cheaper but the costs may add up depending on the home’s issues.

Making a fixer upper livable and good as new is a heck of a challenge. But once you’ve done it right, investing in a fixer-upper property can be one of the greatest decisions in your life.

If you’re thinking of buying a fixer upper rather than having a new home built from scratch, here are five questions to ask yourself before taking the risk.

1. Does the fixer upper home have good bones?

Before you get discouraged with cosmetic flaws like dust and minor cracks, see first if the building has “good bones.” The bones of a house are the elements that keep it standing the test of time.

Pay attention to the floor plan, structure, foundation, roofing, plumbing, and electrical components like cooling and heating. These are the features that cost a lot when you fix or replace them so make sure they’re in good shape.

In addition, a house with poor architecture may put lives of the dwellers in jeopardy especially when natural disasters like earthquakes and floods strike. So take time in inspecting the house before buying it. You might be surprised to discover something nasty once you peep behind the cabinets, remove the carpets, or look underneath the sink.

2. Is it built on a good location?

Whether you’re going to buy for your personal use or you’re planning to invest in a rental property, finding the best location should always be a major consideration. Firstly, inspect the kind of neighborhood you’ll live in:

  • Is the place free from infestations?
  • Is the area prone to flooding or landslide?
  • Are the people in the neighborhood friendly and accommodating?
  • Are the security measures well implemented?
  • How beautiful are the view and atmosphere?
  • Are there any piggeries, poultry farms, factories, and other establishments which may cause air pollution, unpleasant smell, and noise?

Another thing to keep in mind is its accessibility. A house that is near commercial areas like schools, offices, shopping centers, and gas stations is a jackpot. No matter how stunning the home’s design is, all the money and hard work might go to the drain if your location is a major fail.

3. Cost-wise, is it really better than newly-built ones?

The less work the property needs, the less risk you’ll have. However, old properties that require fewer repairs tend to have more competition, and thus more expensive.

In order to have a successful investment, figure out how bad the condition is and how much work that needs to be done. The costs aren’t always fixed, so prepare yourself for surprise expenses like human errors, additional equipment, and discovery of hidden huge flaws.

The sum of the estimated cost should be way less than the amount you could have saved if you purchase a newly-built property. Remember that a newly-built property that costs $ 100,000 is always better than a fixer-upper property that costs $ 70,000 with $ 30,000 worth of repair.

4. Do you have exit strategies?

An exit strategy refers to the way of cashing out your investment. According to Steve Lander, an author and finance and real estate enthusiast, you should have both a primary and a secondary exit strategy to increase your chance of success in your fixer-upper investment.

The primary exit strategy is to sell the property and gain a great amount of profit. The secondary exit strategy is to produce good income without having to sell it. Some ways include renting it out or establishing a business.

5. How driven are you?

Money isn’t your sole investment here. Remodeling a fixer upper requires your time, skills, and commitment (and patience) as well. That means waking up to sound sawing of wood and drilling and hammering of walls. And despite hiring a professional home builder or contractor, you should also actively participate in the process to avoid surprise costs due to wrong measurements and wrong materials. If you’re committed to doing all these things, then investing in a fixer upper property might be a wiser choice.

In return, you’ll have that sense of accomplishment once you turn an old and cheap structure into looking like an elegant abode.