A fixer-upper is a house that needs a little - or a lot - of tender love and care. In many cases, however, tender love and care tends to equate to money out of your pocket. While flipping a house can be a great way to make some money in real estate - especially as the segment rapidly recovers - sometimes you'll end up spending more money than you make at the end of the day, which could ultimately cost you instead of getting you a return on your investment. We've included our top list of reasons to walk away from your next potential fixer-upper.
A common problem in old houses is mold. Unfortunately, mold can be an expensive problem to remedy. Add to that the fact that mold could be evidence of a greater problem in the house and you have a recipe for a bad investment. Mold on the inside of a house can mean plumbing problems and extensive damage to drywall, Chasin Prather, with ERA Buy America Real Estate, told MSN Real Estate. Mold on the outside can be an even bigger problem, indicating a bad drainage system, which can be very expensive to repair and if left untreated could mean that your basement will flood every time it rains.
If it leaks in your house every time it rains, you've got a real problem. Not only do you have to deal with extra moisture - a house's worst enemy - you also have to pay someone to fix it. This is no cheap task, it's difficult work, plus it's dangerous. For you, this means more money coming out of your pocket.
Dying or broken heater
No matter the kind of heater in the house you're considering, if it's breaking down you should probably walk away. A new heater will cost you in the thousands of dollars, and potentially even more if the system used to pipe heat around the house has problems too. Unfortunately, buying a new heater is unlikely to add a lot to the value of a home because it's considered standard, meaning that you won't see much of that money back when you go to sell.
The foundation of the house is crucial, so any problem here is a potential reason to walk away. Since it's under the house, foundation work is extremely difficult and that means expensive. Even worse, if you were planning on living in the house you can expect serious disruptions while this work goes on. This is another pass.
Wiring runs throughout your house, and with time old wiring can degrade or be damaged by pests living inside. Because wiring is so inaccessible, it can be expensive to repair or replace. Bill Jacques, president of the American Society of Home Inspectors, warns that old circuit-breaker panels made by Federal Pacific Electric Co. have in many cases failed to trip, exposing homeowners to fires. A fixer-upper might be worth time, energy and money to you, but it's certainly not worth risking your life over.
Don't let our list of fixer-upper no-nos scare you off though, as you can get a great house at a very reasonable price if you're just willing to put in a little work. Lisa Aberle of Get Rich Slowly suggests applying a simple formula to be sure that you aren't making a bad investment. Take the price of the house and then add to it the cost of all repairs you'll have to do. If the number you get is still lower than the average price of homes in the neighborhood, you're in luck.
How do you find out about all the repairs you'll be doing? Simple! Get a property inspection. A qualified property inspection professional can tell you about problems that you won't necessarily see, make suggestions as to how to save money on repairs and even potentially improve your bargaining position when you make an offer.