With housing inventory low and prices high, homes in need of repair are not only in demand, but are sometimes the only option for buyers, in particular those on a tight budget.
And regardless of budget, being able to design your home exactly how you want it, is what many homeowners dream of.
Buying a fixer upper, however, can also be a daunting prospect, especially for first-time buyers who have never had to repair or renovate a property before.
Kim Sheen, is a real estate broker and owner of Kim Sheen Properties, as well as deputy chair of the Chamber of Commerce Executive Real Estate Division.
The part of her job she enjoys most is helping first-time buyers get onto Bermuda’s property ladder; and in the current market, that usually means having to buy homes that are less than shipshape.
She shared her advice for buying a home in need of work, warned of the pitfalls, but also explained the benefits and joy this can bring to homeowners.
What makes a house a fixer upper?
There can be a huge variance in what is considered a fixer upper, but Ms Sheen defines it as one that requires an updated kitchen and bathrooms. It may need new windows and doors, a new coat of paint inside and out, refinished or newly installed flooring and new or updated plumbing. The exterior landscaping will be in need of attention and the roof will need cleaning and painting.
Sometimes, however, she said: “It requires what I call a gut job in which everything is taken away with just the retaining walls left.”
Know what you’re getting
Whatever the state of the house you are buying, “you have to do your homework.”
Ms Sheen said: “Make sure that the house is sound. If you don’t have a sound house, then what’s the point?”
She always advises buyers to get a structural inspection. This is different from the appraisal. An appraiser, she said, “just wants to make sure that the property is safe and that there are no major issues with the property.”
Once you have determined that the house is sound, consider the areas that “make the house tick”, such as electrical, plumbing, the water tank and the cess pit.
After that, look at the windows, floors and doors. “A lot of people forget to do that,” she said. “The doors, the flooring. Obviously if it’s coming up and looks ragged. If there’s carpet down, you might want to ask the owner if there are hardwoods underneath the carpet. That way you can actually refinish the hardwoods and add value to your property.”
It’s also advisable, if possible, to have a contractor look at the property.
“You have to have all your information in order to make a decision,” Ms Sheen said, adding that a contractor may also be able to give an estimate for the renovations.
“I always tell buyers to double the estimates to be on the safe side.”
Where the renovation costs are beyond the budget, Ms Sheen will often see a buyer purchase the property anyway, but only fix what is necessary, postponing major projects until a later date.
“I do try to advise first-time buyers to not go in over their head. It’s the biggest financial decision they’ll ever make and we want to ensure that they make the right decision.”
Another important consideration when planning and budgeting for a renovation is the fact that the construction industry is booming at the moment and good contractors may not be able to start for several months. When appointing a contractor, she advised buyers to find one with a good reputation and references.
Supply and demand
In spite of the amount of work involved in renovating a home, Ms Sheen has seen a significant increase in demand for fixer upper properties.
“Due to the limited supply of homes within the past five years, I feel the demand has been much higher than 10 years ago,” she explained.
“In that time, we had an influx of properties requiring work sitting on the market. Fast forward to now, if buyers can qualify and have the right folks to assist, they are scooping them up.”
Often, she added, people care more about the location than the condition of the house.
“If a fixer upper is in a location where they want to be then they’ll do whatever it takes to get it.”
In other parts of the world, buyers are often competing with what Ms Sheen calls “flippers”: a developer will buy a home, do it up and sell it on for a profit.
This doesn’t tend to happen in Bermuda, because of the high prices. What she does see, however, is people buying homes to do up and then rent out.
“Right now, in this market, there’s been houses that have been sold, renovated and rented out,” she said.
Also driving demand is a general desire to make the house you buy your own, as well as add value to it, especially for more experienced buyers, or those with a more generous budget. A particularly popular add-on, for example, has become a home office.
For those who have the time, resources and energy, buying a fixer upper can mean a buyer ultimately gets the type of home they’ve always wanted, in their ideal location.
“It’s a stressful thing to go through,” she warned. “Patience is a virtue and you’ve got to make sure your bank account can sustain it. Especially with Bermuda houses.”
