Strategy: buying a home in need of upgrades

[canadianoutlaw]

We are house hunting. Initially had no desire to buy anything but turnkey condition. However current inventory in the area is limited and we haven't had much luck so am considering lowing the bar and buying a house in the neighborhood we want, with "good bones", but likely in need of a some upgrades (e.g. maybe kitchen, bathrooms, deck/porch, paint).

Thoughts on the mechanics and best strategies/approaches to financing upgrades while buying a home? Any resources/references would be appreciated.

[ENT Doc]

Learn to love what you have and cash flow it with future savings for designated projects.

[Budgetmaestra]

the projects you list all sound like more like updating and cosmetic stuff than actual things that need to be done. Electrical, plumbing, roof, insulation, windows, siding, etc are obviously things that need to be addressed and costs a ton, so if all it needs is updated kitchen and bath I’d be ok with that.

Buy the location, the lot and the layout that works for you. Everything else you can learn to live with. I’d cash flow projects over time. Every time we bought a house all the projects that I thought were needed when we bought felt less important after a year of living in the house. For something like a kitchen layout really matters so I’d live in it for at least a year before doing a reno.

[CordMcNally]

I'd be careful because you can easily bite off more than you can chew. It's also easy to overbuy and not take the potential cost of upgrades into the purchase price.

[wideopenspaces]

We did this. We bought a fixer in a great location and neighborhood 2 years ago and we don't regret it. Just make sure the upgrades you want to do aren't too nice for the area. I'm very picky and I love home design and I've been surprised with how easy it's been for me to live with things as they are while making changes over time, which we cash flow. I'd like to do a major reno in a few years once we have a better idea if we are here for the long haul or not but we will cash flow that as well. So I'd make sure you can live with the house as is for long enough to save up for what you want to do so you don't take on a bunch of extra debt.

[Shant]

Don't underestimate the stress of living in an active renovation, it is a big trigger of relationship breakdown. If you aren't planning to diy, check how easy it is to get construction done right now. My friend in Vancouver just finished a redo of his house and it was incredibly difficult to find tradespeople and basic help. His project ran 6 months behind schedule.

[artemis]

the projects you list all sound like more like updating and cosmetic stuff than actual things that need to be done. Electrical, plumbing, roof, insulation, windows, siding, etc are obviously things that need to be addressed and costs a ton, so if all it needs is updated kitchen and bath I’d be ok with that.

I agree with this. You want to distinguish between cosmetic upgrades and big-ticket updates to the bones of the house. You don’t NEED to do the former in order to keep the house livable, so they can be done as you can afford them.

And remember, even a brand new house will need those sorts of updates eventually! Over time paint gets scuffed, carpets wear out, etc. When you buy a brand-new house, you are merely postponing updates, not avoiding them altogether. It’s like buying a new car. What do you call a new car that’s just been driven off the dealer’s lot? Answer: a used car. Nothing stays new forever!

Concentrate on finding a good lot in a good location, the overall layout of the house, and the essential “bones” (roof, siding, foundation, windows, electrical, plumbing, HVAC). If all those things check out, you’ve found the right house. You can repaint, recarpet, upgrade the kitchen counter tops, etc., over time to turn the place into your perfect home.

[DoctorSpouse]

Nothing helpful to add but just to say that we're in the same boat. Outdated homes are what we can easily afford right now and it opens up our options quite a bit. The idea of remodeling/updating seems daunting yet exciting at the same time. The comment above about biting off more than we can chew does worry me too, or running into big unforeseen problems. Ideally we'd like to buy, do the big renovations, then move in and do smaller stuff over time, hopefully using extra cash saved from downpayment to pay for reno.

[Brains428]

If you can manage, I'd buy the house and just take a HELOC to do anything major (that interest is deductible too) before you move in. I'd talk to contractors prior to taking out said HELOC, though-- everyone is backed up.

Also, if there is anything that would require restructuring, lumber is much more expensive currently.

FWIW- we are building because we figured the cost of renovation would always get us near our price to build. All the nicer older neighborhoods here were built in the 80s and 90s when it was in high fashion to build 5000-6000 square feet (I was told it was like $80/sq ft at the time). That's a lot of square feet to renovate. We are building 3300 square feet.

[resident_1]

Are you sure you want to buy now?
Why not wait until 2021 when prices will go down.

[CordMcNally]

Why not wait until 2021 when prices will go down.

Is that a sure thing?

[Cubicle]

I was in OP's shoes. I didn't want to deal with repairs/upgrades. But I wasn't finding anything I really liked, for the prices they were asking. I stumbled across a "good bones" home. That's literally the phrase my realtor used the 3rd step into the home because it was abhorrent. Odor. Disrepair. Aesthetically puke inducing. Initial list price was dumb high. More than triple what I ended up paying for the place.

One of the best decisions I ever made. I went over budget by 3x. I went over time by 3-4x. I learned so darn much. I can basically build a house now. I moved things exactly where I want them. I know where all the wires & pipes are. I expanded rooms. I love my darn house.

You will not budget enough money & time initially. You will not. But if you have flexibility, you can really make "the house" into "your home". Corny but it's actually a thing.

[Peds]

Is that a sure thing?

since we just bought, theres only 1 direction the market can go!

[Golden Rod]

If at all possible, buy and have the renovation work done before you move in. No matter how careful you are, or how many plastic sheets you put up, you cannot contain the dust from serious renovations (so if you're living there while reno's are underway, it will get everywhere and in everything).

For a budget kitchen, you can actually get very nice [solid wood, dovetail drawers, soft close, etc.] cabinets that you assemble yourself, and installing cabinets is ridiculously simple. Then just have the granite folks come and install your counter and you're set. I did our whole kitchen (two houses ago) by myself and had less than $12k into it when all was said and done, and that included new higher end appliances. Contractor estimates to do the exact same kitchen started in the mid $20s and went all the way up to $45k. My wife was in residency at the time, so I used the cabinet place's 0% financing, paid cash for the granite, and got the appliances at 0% from a local kitchen store...all paid off before the promotional period expired.

Long story short, renovations truly can allow you to make a house your own. Just be careful not to overdo it. We did that once, and my wife was so bitter about the lengthy renovation process (even though the house turned out exactly how we wanted) that we ended up selling it less than a year later.