Steve D Valentine breaks down why fixer-uppers often need private loans or cash reserves while move-in ready homes are easier to finance. He shares his own experience renovating a home over 11 years, and explains why first-time buyers usually shouldn't chase the fixer-upper dream.
Chapters
So it's always interesting. I always get the phone calls of hey, I want to buy a fix up. I want to buy something below market. And you're like, cool, how much money do you have? Well, I just have enough for down payment. Well, most fix up opportunities are not financeable. They're either financeable through private money or hard money or something of that nature. But most of them are not available for that. There are some complicated loan products that can be used for renovation, but they're complicated. So buying a move in ready home, you're buying at a price that you can finance. You know, you're 5, 10, 20% down. The repairs have already been done. As long as they've been done to a quality that you, you like, then it's better for, you know, if your first home or your second home, whatever it looks like, to buy something like this house that's already been redone. Now maybe you want to change a few things, but you're not going through and bulldozing the inside of it because it's money. So let's say you could buy this house for 1.5 million and it would be worth two to two and a half million once you got done with the renovation. A do you have 3 to $400,000 in cash lying around to put into the renovation? Do you have somewhere to stay for 12 to 18 months while you mess with contractors to do it and see, is that really what you want to through? Because last time I checked, you wanted to buy a house. Now if that's a dream thing where you're like, I want to buy my forever home and I want to renovate it over time, which is exactly what my wife and I did. We bought a house that was a piece of, but it was financeable. And over the last 11 years, we've renovated every inch of it one section at a time. It's kind of fun, kind of not. Remember, my wife's the contractor, so living with the contractor is a little easier. You don't have Mike showing up at 7am to come in and grind out your floors. So I would always take somebody depending on their financials and what their goals are and talk to them about the pros and cons of buying something that's complete versus buying something. It's a deal. Just because it's below market doesn't mean it's a deal. It means that there's a bunch of work that needs to be done and they priced it according to that work being done.
